United States Securities and Exchange Commission
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of Registered Management Investment Companies
Investment Company Act file number 811-7736
Janus Aspen Series
(Exact name of registrant as specified in charter)
151 Detroit Street, Denver, Colorado 80206
(Address of principal executive offices) (Zip code)
Michelle Rosenberg, 151 Detroit Street, Denver, Colorado 80206
(Name and address of agent for service)
Registrant's telephone number, including area code: 303-333-3863
Date of fiscal year end: 12/31
Date of reporting period: 12/31/16
Item 1 - Reports to Shareholders
ANNUAL REPORT December 31, 2016 | |||
Janus Aspen Balanced Portfolio | |||
Janus Aspen Series | |||
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HIGHLIGHTS · Portfolio management perspective · Investment strategy behind your portfolio · Portfolio performance, characteristics | |||
Table of Contents
Janus Aspen Balanced Portfolio
Janus Aspen Balanced Portfolio (unaudited)
PERFORMANCE OVERVIEW
Janus Aspen Balanced Portfolio’s Institutional Shares and Service Shares returned 4.60% and 4.32%, respectively, for the 12-month period ended December 31, 2016, compared with 7.84% for the Balanced Index, an internally-calculated benchmark that combines the total returns from the S&P 500 Index (55%) and the Bloomberg Barclays U.S. Aggregate Bond Index (45%). The S&P 500 Index returned 11.96% and the Bloomberg Barclays U.S. Aggregate Bond Index returned 2.65%.
INVESTMENT ENVIRONMENT
The year began with concerns over sluggish economic growth and the possibility of recession weighing heavily on global markets. Slower-than-expected growth in China, the implications of negative interest rates and weakness in commodities-related sectors also dragged markets down through early February. However, a more optimistic outlook was in favor by April. Risk assets, as well as rates, were rallying and crude oil prices had reset in a higher trading band. Markets hit a few road bumps in June with weak U.S. employment data bringing the health of the U.S. economy back into question and UK voters opting to leave the European Union. Yet credit spreads and U.S. stocks quickly recovered, and several equity benchmark indices began record setting trends.
Brexit, in the interim, was less damaging than investors had feared. Concern from central banks over the ineffective nature of ultra-accommodative monetary policy hinted at the need for fiscal stimulus to take the next shot at spurring global economic growth. U.S. economic data was ticking up, and signs of inflation emerged. Market participants latched on to the possibility for stronger economic growth and higher inflation, and U.S. Treasury yields began their upward march. The election of Donald Trump to the U.S. presidency added further optimism as pro-growth fiscal policies now seem within reach. Inflation expectations continued to climb. Equities and corporate credit remained in favor, while rates moved higher. In December, the Federal Reserve (Fed) announced a widely expected 25 basis point increase to the target federal funds rate, and a projection of three additional hikes in 2017 which drove Treasury yields higher still.
Rates rose across the yield curve, with the move most pronounced in front-end yields. After widening in February, investment-grade and high-yield corporate credit spreads tightened throughout the remainder of the year.
PERFORMANCE DISCUSSION
The Portfolio, which seeks to provide more consistent returns over time by allocating across the spectrum of fixed income and equity securities, underperformed the Balanced Index, a blended benchmark of the S&P 500 Index (55%) and the Bloomberg Barclays U.S. Aggregate Bond Index (45%). The Portfolio underperformed its primary benchmark, the S&P 500 Index, and outperformed its secondary benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index.
Compared to the Balanced Index, the Portfolio remains overweight equities, with a 63% allocation to stocks, approximately 37% in fixed income and a small portion in cash. Our year-end allocation reflects our view that on a risk-adjusted basis, equities present more attractive opportunities relative to fixed income. The equity weighting may vary based on market conditions.
The Portfolio’s equity sleeve underperformed its benchmark, the S&P 500 Index. Value equities generally outperformed growth during the year, creating a headwind for our growth tilt. At the sector level, holdings in health care and consumer discretionary detracted on a relative basis. Negative sentiment surrounded the health care sector for most of the year, largely due to political rhetoric about controlling drug prices. Late in the year, uncertainty around the impact of Mr. Trump’s plans for the Affordable Care Act and other policies weighed on the sector. A zero weighting in the strong-performing energy sector also detracted. Given the persistent oil oversupply and the
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Janus Aspen Balanced Portfolio (unaudited)
likelihood of a stronger dollar, we believed stronger opportunities existed in other sectors. The energy sector benefited from rebounding crude oil prices, and our lack of exposure hampered relative performance. Contributors to relative results included stock selection in both the consumer staples and real estate sectors, and an overweight to the industrials sector. Industrials, which were unfairly impacted by early weakness in the energy sector, benefited as crude oil prices regained their footing. A proposal for increased infrastructure spending by President-elect Trump gave the sector an additional boost near year end.
Allergan was our largest detractor. The specialty pharmaceutical company initially traded down in April when the proposed merger between Allergan and Pfizer fell apart. Later in the period, weaker-than-expected earnings also weighed on the name. We continue to hold this position as we look favorably upon Allergan’s strengthened balance sheet – a result of selling its generics business to Teva Pharmaceutical Industries in August. We also like the company’s shareholder-friendly management team, as well as its diverse set of products, many of which are not subject to government reimbursement.
Nike was our second-largest detractor. The athletic footwear and apparel manufacturer has faced increased competition of late. It also dealt with inventory disruptions throughout the year, largely as a result of the 2016 bankruptcy filing of retailer Sports Authority. In addition, most of Nike’s products are manufactured overseas and Republican-proposed tax reforms could potentially drive up the costs of those goods. Although the passage of such reforms is far from certain, it is something we will be watching closely. In the meantime, we expect Nike to work through its excess inventory in the next two quarters and, longer term, experience growth in its direct-to-consumer sales channel. We remain positive on the stock.
Bristol-Myers Squibb, after an up-and-down year, also detracted. While its shares had risen earlier in the period on positive sentiment surrounding its advanced melanoma drug, Opdivo, a disappointing clinical trial for the drug’s use as a first-line treatment against a common form of lung cancer raised investor concerns over the company’s perceived position as the leader in immuno-oncology. We believe these concerns are overblown, and that a combination therapy of Opdivo and another of the company’s melanoma drugs, Yervoy, will together prove successful in treating lung cancer. We are also optimistic that these drugs will successfully treat broader cancer types.
While the aforementioned stocks detracted from performance, we were pleased by the results of other companies in the Portfolio. The top two contributors, financial firms Morgan Stanley and CME Group, were beneficiaries of a steepening yield curve in the latter half of the period and Mr. Trump’s proposals for a more relaxed regulatory environment. Specifically, CME Group was the largest contributor. The operator of options and futures exchanges performed well as a result of increased market volatility in the latter part of the year and heightened trading volume passing through its exchanges. That, in turn, boosted trading fees for CME. We continue to like the stock and believe the company should benefit from regulatory tailwinds, an increasingly global user base, and the digitization of its markets.
Morgan Stanley also aided performance. Climbing interest rates helped the financial services company pad net interest income. A rising equity market also helped, as the company was able to collect higher fees from its asset management business. A rebound in Fixed Income, Currency and Commodities (FICC) trading was another benefit. We continue to like the stock.
Microsoft was another top contributor. The tech giant reported earnings that beat consensus estimates multiple quarters in a row, thanks in large part to its cloud computing business, Azure. We are increasingly positive on the migration of companies to the cloud, and Microsoft is now the second-largest provider of cloud-based IT services. At the same time, Microsoft has been aggressive in reducing costs, buying back shares and paying dividends to shareholders. We remain positive on the stock.
The Portfolio’s fixed income sleeve outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index. We were positioned defensively in corporate credit for much of the period, wary of a fragile U.S. economy and an abundance of shareholder-friendly activity indicative of the latter stages of a credit cycle. While we continued to focus on issuers with higher quality business models and solid balance sheets throughout the year, our outlook shifted to selectively opportunistic by December’s end. An improving economic picture, recovering commodity prices, and stronger-than-expected third quarter earnings supported our view, as did steady demand for U.S. corporate credit due to its comparatively higher yields versus other global fixed income asset classes. It is likely,
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Janus Aspen Balanced Portfolio (unaudited)
in our view, that the results of the U.S. election and the associated prospects for growth have further extended the credit cycle, also contributing to our modestly improved outlook. On rates, however, we have turned defensive. An actively tightening Fed in combination with rising inflationary pressures led us to reduce duration exposure coming from Treasurys. We also diversified our duration profile with the addition of Treasury Inflation-Protected Securities (TIPS). The fixed income sleeve’s duration ended December at 73% of the benchmark.
Outperformance in the fixed income sleeve was led by our U.S. mortgage-backed securities (MBS). As rates rallied during the first half of the year, the prepayment-resistant nature of our positions proved beneficial. As rates rose over the latter part of the period, our positions were less exposed to the duration extension across the asset class. Within MBS, we focus on generic agency pass-throughs with higher coupons and less negative convexity than the positions in the index.
Our overweight allocation in investment-grade corporate credit also contributed positively to relative results, as did spread carry, a measure of excess income generated by the Portfolio’s holdings. Investment-grade corporate credit was the strongest performing asset class in the index and benefited from significant spread tightening.
On a credit sector basis, relative contributors included technology, independent energy and brokerage, asset managers and exchanges. Outperformance in technology was due, in part, to our security selection, including positions in both Verisk Analytics and Seagate Technology. Positive sentiment surrounded Verisk Analytics upon the sale of its health care services business early in the period. The asset sale accelerated deleveraging initiatives by the data analytics firm, which was also well received by investors. Demand for personal computers and enterprise infrastructure, which had been weak during the first half of the year, picked up in the second half and benefited the cyclical technology sector, including our position in data storage company Seagate Technology.
In energy, the rebound of crude oil prices, following February’s decline, benefited surviving companies – many of which have streamlined their businesses and shored up their balance sheets via asset sales. Our general overweight allocation in independent energy contributed to relative results accordingly. An overweight position in brokerage, asset managers and exchanges also benefited relative performance, as did spread carry in the sector. Heightened market volatility supported the sector in the latter half of the year, as a rallying stock market and climbing interest rates brought increased transaction volume.
Relative credit sector detractors were led by our holdings in electric utilities. Investor demand for U.S.-based defensive business models such as electric utilities boosted the sector during the period, and our underweight allocation dragged on relative performance. Holdings in the hard-hit pharmaceuticals sector also weighed on relative results, as did security selection in midstream energy. In midstream energy, our security selection did not keep pace with the broader sector as it rallied with the rising price of crude oil. Specifically our position in NGL Energy Partners LP detracted from performance in the sector. The company struggled during the beginning of the year, as the drop in crude oil prices weighed significantly on energy-related companies. Exposure to EnLink Midstream Partners LP also weighed on results, as the company was downgraded early in the period. We exited both positions, prior to the rebound in oil.
Royal Bank of Scotland (RBS) was the leading corporate detractor from relative results. We had owned RBS, in large part, due to the bank’s singular focus on simplifying its balance sheet. However, Brexit and associated uncertainties as well as lower interest rates in the UK have significantly affected RBS’ ability to execute on their business plan. We exited our position.
On an asset class basis, detractors included our cash position and our yield curve positioning in U.S. Treasurys. Cash is not used as a strategy within the Portfolio but is a residual of our fundamental, bottom-up investment process. In terms of Treasurys, we reduced duration exposure from the asset class following the U.S. election. However, exposure to the 5- and 10-year notes, which were significantly impacted by future Fed projections, weighed on results.
Please see the Derivative Instruments section in the “Notes to Financial Statements” for a discussion of derivatives used by the Portfolio.
OUTLOOK
We think U.S. stocks continue to be well positioned, and intend to maintain our overweight to equities as we move into the new year. Mr. Trump campaigned on a pro-growth agenda that we believe will be business-friendly. Proposed tax reforms, deregulation and infrastructure spending could help drive inflation and faster economic
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Janus Aspen Balanced Portfolio (unaudited)
growth, leading to higher interest rates, increased capital expenditure and rising wages – all a net positive for U.S. stocks. In particular, the cyclical stocks that accelerated after the election, such as financials and industrials, could continue to charge ahead in 2017.
This outlook, of course, hinges on Mr. Trump’s agenda becoming a reality. In addition, proposed trade tariffs and a strong dollar could weigh on certain U.S. multinational companies. Given that, we remain optimistic about U.S. stocks but are focused on finding companies that are exposed to secular growth trends and can continue to increase earnings and free cash flow.
We anticipate a steeper yield curve, with the front end moving on Fed projections and the long end rising further on increased inflationary expectations. The Fed’s forecast for three interest rate hikes in 2017 is in line with our expectations, although we believe more hikes could be warranted in a reflationary environment. As a result, we will continue to actively manage duration and yield curve positioning in the fixed income sleeve, with the expectation of maintaining duration below that of the benchmark.
New fiscal policies, if properly implemented, should stimulate growth and the accompanying rise in operating earnings could allow companies to grow into their capital structures, reversing the recent trend of increasing leverage. We will closely monitor the difference between rhetoric and policy implementation, as well as the transition from policy intentions to growth. Our analysts are conducting in-depth, bottom-up research to identify issuers with higher quality business models and strong fundamentals, particularly in sectors that may benefit from a change in economic policy.
With growth prospects on the horizon, we are taking a selectively opportunistic approach to U.S. corporate credit, yet we remain mindful of tighter spread levels after tightening in 2016. We are also closely monitoring the ability for corporate spreads to hold near current levels in a rising-rate environment. Our focus remains on issuers with ample liquidity, strong free-cash-flow generation potential and commitment to a sound balance sheet. In this extended cycle, the importance of security avoidance remains a central aspect of our investment process. Even as we opportunistically add to credit, we intend to maintain a conservative bias in the fixed income sleeve, reflecting our commitment to deliver capital preservation and strong risk-adjusted returns for our clients.
Thank you for your investment in Janus Aspen Balanced Portfolio.
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Janus Aspen Balanced Portfolio (unaudited)
Portfolio At A Glance
December 31, 2016
5 Top Performers - Holdings |
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Contribution | Contribution | |||||
CME Group Inc | 0.80% | Allergan plc | -1.00% | |||
Morgan Stanley | 0.75% | NIKE Inc | -0.69% | |||
Microsoft Corp | 0.73% | Regeneron Pharmaceuticals Inc | -0.48% | |||
Boeing Co | 0.70% | Bristol-Myers Squibb Co | -0.47% | |||
Synchrony Financial | 0.58% | Norwegian Cruise Line Holdings Ltd | -0.39% | |||
5 Top Performers - Sectors* |
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Portfolio | Portfolio Weighting | S&P 500 Index | ||||
Contribution | (Average % of Equity) | Weighting | ||||
Consumer Staples | 0.47% | 8.68% | 10.15% | |||
Real Estate | 0.29% | 1.15% | 0.97% | |||
Other** | 0.15% | 1.48% | 0.00% | |||
Industrials | 0.08% | 11.56% | 10.05% | |||
Utilities | -0.14% | 0.00% | 3.32% | |||
5 Bottom Performers - Sectors* |
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Portfolio | Portfolio Weighting | S&P 500 Index | ||||
Contribution | (Average % of Equity) | Weighting | ||||
Health Care | -2.29% | 16.76% | 14.59% | |||
Consumer Discretionary | -1.17% | 20.77% | 12.56% | |||
Energy | -0.98% | 0.00% | 7.05% | |||
Information Technology | -0.68% | 19.82% | 20.60% | |||
Financials | -0.55% | 15.53% | 15.17% | |||
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||||||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |||||
** | Not a GICS classified sector. |
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Janus Aspen Balanced Portfolio (unaudited)
Portfolio At A Glance
December 31, 2016
5 Largest Equity Holdings - (% of Net Assets) | |
Microsoft Corp | |
Software | 3.2% |
Boeing Co | |
Aerospace & Defense | 2.6% |
Mastercard Inc | |
Information Technology Services | 2.6% |
Altria Group Inc | |
Tobacco | 2.4% |
Amgen Inc | |
Biotechnology | 2.2% |
13.0% |
Asset Allocation - (% of Net Assets) | |||||
Common Stocks | 62.6% | ||||
Corporate Bonds | 16.2% | ||||
Mortgage-Backed Securities | 8.4% | ||||
U.S. Government Agency Notes | 3.7% | ||||
United States Treasury Notes/Bonds | 3.1% | ||||
Asset-Backed/Commercial Mortgage-Backed Securities | 2.7% | ||||
Bank Loans and Mezzanine Loans | 1.8% | ||||
Inflation-Indexed Bonds | 0.6% | ||||
Investment Companies | 0.6% | ||||
Preferred Stocks | 0.3% | ||||
Other | (0.0)% | ||||
100.0% |
Top Country Allocations - Long Positions - (% of Investment Securities) | |
As of December 31, 2016 | As of December 31, 2015 |
6 | DECEMBER 31, 2016 |
Janus Aspen Balanced Portfolio (unaudited)
Performance
See important disclosures on the next page. |
| Expense Ratios - | ||||||||
Average Annual Total Return - for the periods ended December 31, 2016 |
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| per the May 1, 2016 prospectuses | ||||||
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| One | Five | Ten | Since |
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| Total Annual Fund | |
Institutional Shares |
| 4.60% | 9.29% | 7.24% | 9.59% |
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| 0.63% | |
Service Shares |
| 4.32% | 9.02% | 6.97% | 9.42% |
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| 0.89% | |
S&P 500 Index |
| 11.96% | 14.66% | 6.95% | 9.13% |
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Bloomberg Barclays U.S. Aggregate Bond Index |
| 2.65% | 2.23% | 4.34% | 5.29% |
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Balanced Index |
| 7.84% | 9.07% | 6.06% | 7.66% |
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Morningstar Quartile - Institutional Shares |
| 4th | 1st | 1st | 1st |
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Morningstar Ranking - based on total returns for Allocation - 50% to 70% Equity Funds |
| 730/829 | 156/701 | 18/557 | 10/224 |
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A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, portfolio holdings and other details.
Fixed income securities are subject to interest rate, inflation, credit and default risk. The bond market is volatile. As interest rates rise, bond prices usually fall, and vice versa. The return of principal is not guaranteed, and prices may decline if an issuer fails to make timely payments or its credit strength weakens.
Returns shown do not represent actual returns since they do not include insurance charges. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
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Janus Aspen Balanced Portfolio (unaudited)
Performance
See Financial Highlights for actual expense ratios during the reporting period.
Performance for Service Shares prior to December 31, 1999 reflects the performance of Institutional Shares, adjusted to reflect the expenses of Service Shares.
Ranking is for the share class shown only; other classes may have different performance characteristics.
© 2016 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio's holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Effective April 1, 2016, Jeremiah Buckley, Marc Pinto, Mayur Saigal and Darrell Watters are Co-Portfolio Managers of the Portfolio.
*The Portfolio’s inception date – September 13, 1993
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Janus Aspen Balanced Portfolio (unaudited)
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; 12b-1 distribution and shareholder servicing fees (applicable to Service Shares only); transfer agent fees and expenses payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as any charges at the separate account level or contract level. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Actual | Hypothetical | |||||||||
| Beginning | Ending | Expenses |
| Beginning | Ending | Expenses | Net Annualized | ||
Institutional Shares | $1,000.00 | $1,050.50 | $3.25 |
| $1,000.00 | $1,021.97 | $3.20 | 0.63% | ||
Service Shares | $1,000.00 | $1,049.20 | $4.58 |
| $1,000.00 | $1,020.66 | $4.52 | 0.89% | ||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
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Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Asset-Backed/Commercial Mortgage-Backed Securities – 2.7% | |||||||
AmeriCredit Automobile Receivables 2016-1, 3.5900%, 2/8/22 | $1,718,000 | $1,747,809 | |||||
AmeriCredit Automobile Receivables Trust 2012-4, 3.8200%, 2/10/20 (144A) | 792,000 | 794,770 | |||||
AmeriCredit Automobile Receivables Trust 2015-2, 3.0000%, 6/8/21 | 1,180,000 | 1,193,143 | |||||
AmeriCredit Automobile Receivables Trust 2016-2, 3.6500%, 5/9/22 | 1,165,000 | 1,186,551 | |||||
Applebee's Funding LLC / IHOP Funding LLC, 4.2770%, 9/5/44 (144A) | 7,019,000 | 6,937,299 | |||||
Aventura Mall Trust 2013-AVM, 3.7427%, 12/5/32 (144A)‡ | 1,540,000 | 1,557,716 | |||||
Banc of America Commercial Mortgage Trust 2007-3, 5.5485%, 6/10/49‡ | 1,019,148 | 1,032,673 | |||||
Capital Auto Receivables Asset Trust 2013-4, 3.8300%, 7/20/22 (144A) | 641,000 | 650,897 | |||||
CGBAM Commercial Mortgage Trust 2014-HD, 3.5382%, 2/15/31 (144A)‡ | 558,000 | 549,301 | |||||
CKE Restaurant Holdings Inc, 4.4740%, 3/20/43 (144A) | 3,208,750 | 3,166,920 | |||||
COBALT CMBS Commercial Mortgage Trust 2007-C2, 5.5680%, 4/15/47‡ | 449,743 | 450,165 | |||||
COMM 2007-C9 Mortgage Trust, 5.6500%, 12/10/49‡ | 1,140,000 | 1,160,153 | |||||
Commercial Mortgage Trust 2007-GG11, 5.8670%, 12/10/49‡ | 779,573 | 796,693 | |||||
Core Industrial Trust 2015-TEXW, 3.8487%, 2/10/34 (144A)‡ | 1,547,000 | 1,496,065 | |||||
Cosmopolitan Hotel Trust 2016-COSMO, 2.8039%, 11/15/33 (144A)‡ | 532,000 | 534,667 | |||||
Cosmopolitan Hotel Trust 2016-COSMO, 4.2039%, 11/15/33 (144A)‡ | 694,000 | 697,914 | |||||
Cosmopolitan Hotel Trust 2016-COSMO, 5.3539%, 11/15/33 (144A)‡ | 1,024,000 | 1,030,714 | |||||
Domino's Pizza Master Issuer LLC, 5.2160%, 1/25/42 (144A) | 1,314,210 | 1,340,446 | |||||
Domino's Pizza Master Issuer LLC, 3.4840%, 10/25/45 (144A) | 3,100,680 | 3,068,433 | |||||
FREMF 2010 K-SCT Mortgage Trust, 2.0000%, 1/25/20 (144A)§ | 1,107,877 | 1,025,499 | |||||
GAHR Commercial Mortgage Trust 2015-NRF, 3.3822%, 12/15/34 (144A)‡ | 768,000 | 763,300 | |||||
GS Mortgage Securities Corp II, 3.4350%, 12/10/27 (144A)‡ | 1,867,000 | 1,762,900 | |||||
GS Mortgage Securities Corp Trust 2013-NYC5, 3.6490%, 1/10/30 (144A)‡ | 765,000 | 777,287 | |||||
Hilton USA Trust 2013-HLT, 4.4534%, 11/5/30 (144A)‡ | 1,032,000 | 1,033,350 | |||||
J.P. Morgan Chase Commercial Mortgage Securities Trust 2016-WIKI, | |||||||
3.5537%, 10/5/31 (144A) | 336,000 | 338,350 | |||||
J.P. Morgan Chase Commercial Mortgage Securities Trust 2016-WIKI, | |||||||
4.0090%, 10/5/31 (144A)‡ | 513,000 | 509,944 | |||||
JP Morgan Chase Commercial Mortgage Securities Trust 2015-SGP, | |||||||
3.4539%, 7/15/36 (144A)‡ | 514,000 | 517,201 | |||||
JP Morgan Chase Commercial Mortgage Securities Trust 2015-SGP, | |||||||
5.2039%, 7/15/36 (144A)‡ | 1,634,000 | 1,644,205 | |||||
JP Morgan Chase Commercial Mortgage Securities Trust 2015-UES, | |||||||
3.6210%, 9/5/32 (144A)‡ | 1,084,000 | 1,048,289 | |||||
LB-UBS Commercial Mortgage Trust 2006-C1, 5.2760%, 2/15/41‡ | 955,368 | 955,415 | |||||
LB-UBS Commercial Mortgage Trust 2007-C1, 5.4840%, 2/15/40 | 1,183,007 | 1,184,041 | |||||
LB-UBS Commercial Mortgage Trust 2007-C2, 5.4930%, 2/15/40‡ | 685,350 | 691,027 | |||||
LB-UBS Commercial Mortgage Trust 2007-C7, 6.2452%, 9/15/45‡ | 932,101 | 939,789 | |||||
OSCAR US Funding Trust V, 2.7300%, 12/15/20 (144A) | 570,000 | 563,492 | |||||
OSCAR US Funding Trust V, 2.9900%, 12/15/23 (144A) | 490,000 | 480,261 | |||||
Santander Drive Auto Receivables Trust 2012-6, 2.5200%, 9/17/18 | 585,942 | 586,720 | |||||
Santander Drive Auto Receivables Trust 2013-4, 4.6700%, 1/15/20 (144A) | 2,189,000 | 2,226,828 | |||||
Santander Drive Auto Receivables Trust 2013-A, 4.7100%, 1/15/21 (144A) | 1,166,000 | 1,195,550 | |||||
Santander Drive Auto Receivables Trust 2015-1, 3.2400%, 4/15/21 | 1,237,000 | 1,251,467 | |||||
Santander Drive Auto Receivables Trust 2015-4, 3.5300%, 8/16/21 | 2,120,000 | 2,154,832 | |||||
Starwood Retail Property Trust 2014-STAR, 3.2039%, 11/15/27 (144A)‡ | 654,000 | 644,567 | |||||
Starwood Retail Property Trust 2014-STAR, 3.9539%, 11/15/27 (144A)‡ | 1,997,000 | 1,902,548 | |||||
Starwood Retail Property Trust 2014-STAR, 4.8539%, 11/15/27 (144A)‡ | 1,059,000 | 1,000,623 | |||||
Taco Bell Funding LLC, 3.8320%, 5/25/46 (144A) | 2,286,270 | 2,294,558 | |||||
Wachovia Bank Commercial Mortgage Trust Series 2007-C30, 5.3830%, 12/15/43 | 1,991,086 | 1,991,534 | |||||
Wachovia Bank Commercial Mortgage Trust Series 2007-C31, 5.6600%, 4/15/47‡ | 3,122,572 | 3,150,274 | |||||
Wachovia Bank Commercial Mortgage Trust Series 2007-C33, 5.9692%, 2/15/51‡ | 2,196,098 | 2,201,817 | |||||
Wachovia Bank Commercial Mortgage Trust Series 2007-C34, 5.9416%, 5/15/46‡ | 721,799 | 723,466 | |||||
Wells Fargo Commercial Mortgage Trust 2014-TISH, 3.2882%, 1/15/27 (144A)‡ | 618,000 | 602,821 | |||||
Wells Fargo Commercial Mortgage Trust 2014-TISH, 2.9540%, 2/15/27 (144A)‡ | 1,192,000 | 1,195,425 | |||||
Wells Fargo Commercial Mortgage Trust 2014-TISH, 3.7880%, 2/15/27 (144A)‡ | 309,000 | 309,049 | |||||
Wendys Funding LLC 2015-1, 3.3710%, 6/15/45 (144A) | 3,743,613 | 3,737,907 | |||||
Total Asset-Backed/Commercial Mortgage-Backed Securities (cost $71,333,700) | 70,796,665 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
10 | DECEMBER 31, 2016 |
Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Bank Loans and Mezzanine Loans – 1.8% | |||||||
Basic Industry – 0.1% | |||||||
Axalta Coating Systems US Holdings Inc, 3.4982%, 2/1/23(a),‡ | $2,987,360 | $3,015,381 | |||||
Communications – 0.6% | |||||||
Charter Communications Operating LLC, 3.0200%, 7/1/20‡ | 918,859 | 922,690 | |||||
Charter Communications Operating LLC, 3.0200%, 1/3/21‡ | 1,377,296 | 1,382,653 | |||||
Charter Communications Operating LLC, 3.5000%, 1/15/24‡ | 2,384,020 | 2,396,369 | |||||
Level 3 Financing Inc, 4.0000%, 1/15/20(a),‡ | 286,000 | 289,718 | |||||
Level 3 Financing Inc, 3.5000%, 5/31/22‡ | 4,369,000 | 4,418,151 | |||||
Mission Broadcasting Inc, 0%, 9/26/23(a),‡ | 93,764 | 94,496 | |||||
Nexstar Broadcasting Inc, 0%, 9/26/23(a),‡ | 1,052,236 | 1,060,454 | |||||
Nielsen Finance LLC, 3.1542%, 10/4/23‡ | 2,226,694 | 2,249,896 | |||||
T-Mobile USA Inc, 3.5200%, 11/9/22‡ | 1,826,165 | 1,847,093 | |||||
14,661,520 | |||||||
Consumer Cyclical – 0.6% | |||||||
Aramark Services Inc, 3.3533%, 9/7/19‡ | 1,627,907 | 1,643,176 | |||||
Aramark Services Inc, 3.4982%, 2/24/21‡ | 2,220,583 | 2,239,214 | |||||
Hilton Worldwide Finance LLC, 3.5000%, 10/26/20‡ | 123,151 | 124,160 | |||||
Hilton Worldwide Finance LLC, 3.2561%, 10/25/23(a),‡ | 5,316,605 | 5,373,758 | |||||
KFC Holding Co, 3.4862%, 6/16/23‡ | 5,061,281 | 5,127,735 | |||||
Landry's Inc, 4.0000%, 10/4/23‡ | 2,484,000 | 2,506,629 | |||||
17,014,672 | |||||||
Consumer Non-Cyclical – 0.2% | |||||||
HCA Inc, 3.5200%, 2/15/24‡ | 2,790,008 | 2,821,841 | |||||
Quintiles IMS Inc, 3.5000%, 3/17/21‡ | 1,296,343 | 1,303,745 | |||||
Tumi Holdings Inc, 3.3556%, 8/1/21‡ | 917,000 | 916,239 | |||||
5,041,825 | |||||||
Technology – 0.3% | |||||||
Avago Technologies Cayman Finance Ltd, 3.7039%, 2/1/23(a),‡ | 5,760,886 | 5,840,098 | |||||
CommScope Inc, 3.2700%, 12/29/22(a),‡ | 1,811,243 | 1,826,638 | |||||
7,666,736 | |||||||
Total Bank Loans and Mezzanine Loans (cost $47,188,941) | 47,400,134 | ||||||
Corporate Bonds – 16.2% | |||||||
Asset-Backed Securities – 0.1% | |||||||
American Tower Trust #1, 1.5510%, 3/15/18 (144A) | 2,200,000 | 2,198,005 | |||||
Banking – 2.4% | |||||||
Ally Financial Inc, 3.2500%, 11/5/18 | 1,243,000 | 1,244,554 | |||||
Ally Financial Inc, 8.0000%, 12/31/18 | 506,000 | 552,173 | |||||
Bank of America Corp, 5.4200%, 3/15/17 | 600,000 | 604,346 | |||||
Bank of America Corp, 3.8750%, 3/22/17 | 473,000 | 475,677 | |||||
Bank of America Corp, 5.7000%, 5/2/17 | 1,513,000 | 1,533,596 | |||||
Bank of America Corp, 4.1830%, 11/25/27 | 5,153,000 | 5,148,409 | |||||
Bank of America Corp, 6.3000%µ | 1,024,000 | 1,070,080 | |||||
Bank of America NA, 5.3000%, 3/15/17 | 2,520,000 | 2,539,512 | |||||
Citigroup Inc, 2.3607%, 9/1/23‡ | 2,669,000 | 2,722,068 | |||||
Citizens Financial Group Inc, 3.7500%, 7/1/24 | 764,000 | 738,662 | |||||
Citizens Financial Group Inc, 4.3500%, 8/1/25 | 525,000 | 526,771 | |||||
Citizens Financial Group Inc, 4.3000%, 12/3/25 | 2,932,000 | 2,974,408 | |||||
Credit Suisse AG/New York NY, 1.3750%, 5/26/17 | 586,000 | 586,127 | |||||
Discover Financial Services, 3.9500%, 11/6/24 | 1,401,000 | 1,386,784 | |||||
Discover Financial Services, 3.7500%, 3/4/25 | 1,909,000 | 1,863,988 | |||||
Goldman Sachs Capital I, 6.3450%, 2/15/34 | 3,132,000 | 3,718,702 | |||||
Goldman Sachs Group Inc, 5.6250%, 1/15/17 | 878,000 | 879,072 | |||||
Goldman Sachs Group Inc, 3.7500%, 2/25/26 | 1,832,000 | 1,834,867 | |||||
JPMorgan Chase & Co, 2.2950%, 8/15/21 | 3,527,000 | 3,458,446 | |||||
JPMorgan Chase & Co, 3.3750%, 5/1/23 | 3,430,000 | 3,414,195 | |||||
Morgan Stanley, 5.5500%, 4/27/17 | 874,000 | 885,556 | |||||
Morgan Stanley, 2.4500%, 2/1/19 | 1,301,000 | 1,309,463 | |||||
Morgan Stanley, 2.8000%, 6/16/20 | 1,435,000 | 1,445,732 | |||||
Morgan Stanley, 4.8750%, 11/1/22 | 916,000 | 980,647 | |||||
Morgan Stanley, 3.9500%, 4/23/27 | 1,939,000 | 1,916,498 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 11 |
Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Corporate Bonds – (continued) | |||||||
Banking – (continued) | |||||||
Murray Street Investment Trust I, 4.6470%, 3/9/17Ç | $3,570,000 | $3,588,600 | |||||
Santander UK PLC, 5.0000%, 11/7/23 (144A) | 3,280,000 | 3,336,823 | |||||
SVB Financial Group, 5.3750%, 9/15/20 | 2,363,000 | 2,558,519 | |||||
Synchrony Financial, 2.6000%, 1/15/19 | 97,000 | 97,458 | |||||
Synchrony Financial, 3.0000%, 8/15/19 | 1,891,000 | 1,914,677 | |||||
Synchrony Financial, 4.5000%, 7/23/25 | 2,686,000 | 2,755,495 | |||||
UBS AG, 4.7500%, 5/22/23‡ | 1,681,000 | 1,714,620 | |||||
UBS AG/Jersey, 7.2500%, 2/22/22‡ | 305,000 | 306,805 | |||||
Wells Fargo & Co, 2.1000%, 5/8/17 | 842,000 | 844,374 | |||||
Wells Fargo & Co, 3.0000%, 4/22/26 | 867,000 | 826,152 | |||||
Wells Fargo & Co, 5.8750%µ | 1,576,000 | 1,654,642 | |||||
63,408,498 | |||||||
Basic Industry – 0.4% | |||||||
Air Liquide Finance SA, 1.7500%, 9/27/21 (144A) | 923,000 | 886,254 | |||||
ArcelorMittal, 7.2500%, 2/25/22‡ | 173,000 | 195,058 | |||||
Ashland LLC, 3.8750%, 4/15/18 | 1,272,000 | 1,305,390 | |||||
Georgia-Pacific LLC, 3.1630%, 11/15/21 (144A) | 3,919,000 | 3,961,991 | |||||
Georgia-Pacific LLC, 3.6000%, 3/1/25 (144A) | 1,991,000 | 2,011,221 | |||||
Reliance Steel & Aluminum Co, 4.5000%, 4/15/23 | 1,984,000 | 1,994,164 | |||||
Steel Dynamics Inc, 5.0000%, 12/15/26 (144A) | 228,000 | 227,145 | |||||
10,581,223 | |||||||
Brokerage – 1.4% | |||||||
Carlyle Holdings Finance LLC, 3.8750%, 2/1/23 (144A) | 1,021,000 | 1,029,261 | |||||
Charles Schwab Corp, 3.0000%, 3/10/25 | 795,000 | 779,004 | |||||
Charles Schwab Corp, 4.6250%µ | 1,510,000 | 1,419,400 | |||||
Charles Schwab Corp, 7.0000%µ | 2,196,000 | 2,497,950 | |||||
E*TRADE Financial Corp, 5.3750%, 11/15/22 | 2,630,000 | 2,782,606 | |||||
E*TRADE Financial Corp, 4.6250%, 9/15/23 | 3,515,000 | 3,585,300 | |||||
Intercontinental Exchange Inc, 3.7500%, 12/1/25 | 2,289,000 | 2,348,180 | |||||
Lazard Group LLC, 4.2500%, 11/14/20 | 2,633,000 | 2,751,309 | |||||
Neuberger Berman Group LLC / Neuberger Berman Finance Corp, | |||||||
5.8750%, 3/15/22 (144A) | 2,994,000 | 3,095,047 | |||||
Neuberger Berman Group LLC / Neuberger Berman Finance Corp, | |||||||
4.8750%, 4/15/45 (144A) | 2,763,000 | 2,189,705 | |||||
Raymond James Financial Inc, 5.6250%, 4/1/24 | 5,987,000 | 6,659,604 | |||||
Raymond James Financial Inc, 3.6250%, 9/15/26 | 593,000 | 577,455 | |||||
Scottrade Financial Services Inc, 6.1250%, 7/11/21 (144A) | 846,000 | 955,698 | |||||
TD Ameritrade Holding Corp, 2.9500%, 4/1/22 | 2,253,000 | 2,278,761 | |||||
TD Ameritrade Holding Corp, 3.6250%, 4/1/25 | 4,163,000 | 4,220,961 | |||||
37,170,241 | |||||||
Capital Goods – 0.6% | |||||||
Arconic Inc, 5.1250%, 10/1/24 | 239,000 | 244,975 | |||||
Ball Corp, 4.3750%, 12/15/20 | 1,340,000 | 1,400,300 | |||||
CNH Industrial Capital LLC, 3.6250%, 4/15/18 | 1,449,000 | 1,467,113 | |||||
General Electric Co, 5.0000%µ | 2,502,000 | 2,596,325 | |||||
L-3 Communications Corp, 3.8500%, 12/15/26 | 404,000 | 400,981 | |||||
Martin Marietta Materials Inc, 4.2500%, 7/2/24 | 1,310,000 | 1,329,469 | |||||
Masco Corp, 3.5000%, 4/1/21 | 1,291,000 | 1,294,228 | |||||
Masco Corp, 4.3750%, 4/1/26 | 216,000 | 219,687 | |||||
Owens Corning, 4.2000%, 12/1/24 | 1,207,000 | 1,234,916 | |||||
Owens Corning, 3.4000%, 8/15/26 | 414,000 | 392,693 | |||||
Vulcan Materials Co, 7.0000%, 6/15/18 | 1,559,000 | 1,664,232 | |||||
Vulcan Materials Co, 7.5000%, 6/15/21 | 882,000 | 1,038,555 | |||||
Vulcan Materials Co, 4.5000%, 4/1/25 | 2,528,000 | 2,641,760 | |||||
Xylem Inc/NY, 3.2500%, 11/1/26 | 593,000 | 574,960 | |||||
16,500,194 | |||||||
Communications – 1.6% | |||||||
American Tower Corp, 3.3000%, 2/15/21 | 2,064,000 | 2,085,835 | |||||
American Tower Corp, 3.4500%, 9/15/21 | 214,000 | 216,569 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
12 | DECEMBER 31, 2016 |
Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Corporate Bonds – (continued) | |||||||
Communications – (continued) | |||||||
American Tower Corp, 3.5000%, 1/31/23 | $379,000 | $379,750 | |||||
American Tower Corp, 4.4000%, 2/15/26 | 1,353,000 | 1,380,724 | |||||
American Tower Corp, 3.3750%, 10/15/26 | 2,498,000 | 2,361,297 | |||||
BellSouth LLC, 4.4000%, 4/26/17 (144A) | 10,129,000 | 10,232,822 | |||||
CCO Holdings LLC / CCO Holdings Capital Corp, 5.2500%, 3/15/21 | 1,927,000 | 1,984,810 | |||||
Charter Communications Operating LLC / Charter Communications Operating | |||||||
Capital, 4.9080%, 7/23/25 | 3,098,000 | 3,261,014 | |||||
Comcast Corp, 2.3500%, 1/15/27 | 1,244,000 | 1,147,913 | |||||
Cox Communications Inc, 3.3500%, 9/15/26 (144A) | 2,599,000 | 2,478,188 | |||||
Crown Castle International Corp, 4.8750%, 4/15/22 | 3,225,000 | 3,433,980 | |||||
Crown Castle International Corp, 5.2500%, 1/15/23 | 1,685,000 | 1,813,481 | |||||
SBA Tower Trust, 2.9330%, 12/11/17 (144A) | 1,253,000 | 1,254,299 | |||||
Time Warner Cable LLC, 5.8500%, 5/1/17 | 1,844,000 | 1,870,126 | |||||
UBM PLC, 5.7500%, 11/3/20 (144A) | 2,580,000 | 2,710,378 | |||||
Verizon Communications Inc, 1.7500%, 8/15/21 | 824,000 | 789,722 | |||||
Verizon Communications Inc, 2.6250%, 8/15/26 | 4,762,000 | 4,376,988 | |||||
Verizon Communications Inc, 4.1250%, 8/15/46 | 1,046,000 | 944,739 | |||||
42,722,635 | |||||||
Consumer Cyclical – 1.2% | |||||||
1011778 BC ULC / New Red Finance Inc, 4.6250%, 1/15/22 (144A) | 2,750,000 | 2,805,000 | |||||
Brinker International Inc, 3.8750%, 5/15/23 | 2,716,000 | 2,570,015 | |||||
CVS Health Corp, 2.8000%, 7/20/20 | 4,107,000 | 4,166,391 | |||||
CVS Health Corp, 4.7500%, 12/1/22 | 1,025,000 | 1,111,892 | |||||
CVS Health Corp, 5.0000%, 12/1/24 | 1,371,000 | 1,499,086 | |||||
DR Horton Inc, 4.7500%, 5/15/17 | 813,000 | 820,114 | |||||
DR Horton Inc, 3.7500%, 3/1/19 | 1,806,000 | 1,842,120 | |||||
DR Horton Inc, 4.0000%, 2/15/20 | 346,000 | 355,515 | |||||
Ford Motor Co, 4.3460%, 12/8/26 | 1,499,000 | 1,512,567 | |||||
Ford Motor Credit Co LLC, 3.0000%, 6/12/17 | 576,000 | 579,343 | |||||
General Motors Co, 4.8750%, 10/2/23 | 825,000 | 863,919 | |||||
General Motors Financial Co Inc, 3.7000%, 5/9/23 | 876,000 | 861,047 | |||||
Hanesbrands Inc, 4.6250%, 5/15/24 (144A) | 3,392,000 | 3,290,240 | |||||
IHO Verwaltungs GmbH, 4.1250%, 9/15/21 (144A) | 569,000 | 574,690 | |||||
IHO Verwaltungs GmbH, 4.5000%, 9/15/23 (144A) | 262,000 | 256,105 | |||||
MDC Holdings Inc, 5.5000%, 1/15/24 | 1,982,000 | 2,046,415 | |||||
Schaeffler Finance BV, 4.2500%, 5/15/21 (144A) | 807,000 | 823,140 | |||||
Toll Brothers Finance Corp, 4.0000%, 12/31/18 | 716,000 | 734,795 | |||||
Toll Brothers Finance Corp, 5.8750%, 2/15/22 | 653,000 | 708,505 | |||||
Toll Brothers Finance Corp, 4.3750%, 4/15/23 | 374,000 | 373,065 | |||||
Walgreens Boots Alliance Inc, 2.6000%, 6/1/21 | 659,000 | 654,283 | |||||
Walgreens Boots Alliance Inc, 3.1000%, 6/1/23 | 418,000 | 414,778 | |||||
Walgreens Boots Alliance Inc, 3.4500%, 6/1/26 | 1,699,000 | 1,665,321 | |||||
Walgreens Boots Alliance Inc, 4.6500%, 6/1/46 | 292,000 | 295,729 | |||||
ZF North America Capital Inc, 4.5000%, 4/29/22 (144A) | 545,000 | 562,031 | |||||
31,386,106 | |||||||
Consumer Non-Cyclical – 2.5% | |||||||
AbbVie Inc, 3.2000%, 5/14/26 | 3,482,000 | 3,308,046 | |||||
Actavis Funding SCS, 3.0000%, 3/12/20 | 3,417,000 | 3,462,675 | |||||
Anheuser-Busch InBev Finance Inc, 2.6500%, 2/1/21 | 711,000 | 714,262 | |||||
Anheuser-Busch InBev Finance Inc, 3.3000%, 2/1/23 | 3,258,000 | 3,312,373 | |||||
Anheuser-Busch InBev Finance Inc, 3.6500%, 2/1/26 | 5,937,000 | 6,017,915 | |||||
Anheuser-Busch InBev Finance Inc, 4.9000%, 2/1/46 | 1,666,000 | 1,788,839 | |||||
Becton Dickinson and Co, 1.8000%, 12/15/17 | 1,598,000 | 1,601,530 | |||||
Constellation Brands Inc, 4.2500%, 5/1/23 | 2,469,000 | 2,560,081 | |||||
Constellation Brands Inc, 3.7000%, 12/6/26 | 583,000 | 569,614 | |||||
Danone SA, 2.0770%, 11/2/21 (144A) | 2,683,000 | 2,602,918 | |||||
Danone SA, 2.5890%, 11/2/23 (144A) | 1,618,000 | 1,557,191 | |||||
Express Scripts Holding Co, 4.5000%, 2/25/26 | �� | 1,850,000 | 1,901,987 | ||||
HCA Inc, 3.7500%, 3/15/19 | 1,320,000 | 1,356,300 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 13 |
Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Corporate Bonds – (continued) | |||||||
Consumer Non-Cyclical – (continued) | |||||||
HCA Inc, 5.3750%, 2/1/25 | $344,000 | $344,860 | |||||
Kraft Heinz Foods Co, 2.8000%, 7/2/20 | 1,617,000 | 1,631,236 | |||||
Kraft Heinz Foods Co, 3.5000%, 7/15/22 | 1,381,000 | 1,400,402 | |||||
Kraft Heinz Foods Co, 3.0000%, 6/1/26 | 1,700,000 | 1,593,673 | |||||
Life Technologies Corp, 6.0000%, 3/1/20 | 1,591,000 | 1,732,139 | |||||
Molson Coors Brewing Co, 3.0000%, 7/15/26 | 3,336,000 | 3,148,860 | |||||
Molson Coors Brewing Co, 4.2000%, 7/15/46 | 800,000 | 744,349 | |||||
Newell Brands Inc, 3.1500%, 4/1/21 | 705,000 | 716,881 | |||||
Newell Brands Inc, 3.8500%, 4/1/23 | 668,000 | 692,202 | |||||
Newell Brands Inc, 5.0000%, 11/15/23 | 1,337,000 | 1,433,461 | |||||
Newell Brands Inc, 4.2000%, 4/1/26 | 3,146,000 | 3,279,249 | |||||
Perrigo Finance Unlimited Co, 3.9000%, 12/15/24 | 1,784,000 | 1,744,242 | |||||
Perrigo Finance Unlimited Co, 4.3750%, 3/15/26 | 745,000 | 744,739 | |||||
Shire Acquisitions Investments Ireland DAC, 2.4000%, 9/23/21 | 1,572,000 | 1,517,098 | |||||
Shire Acquisitions Investments Ireland DAC, 2.8750%, 9/23/23 | 2,121,000 | 2,013,565 | |||||
Shire Acquisitions Investments Ireland DAC, 3.2000%, 9/23/26 | 2,133,000 | 1,990,471 | |||||
Smithfield Foods Inc, 5.2500%, 8/1/18 (144A) | 162,000 | 163,823 | |||||
Sysco Corp, 2.5000%, 7/15/21 | 539,000 | 532,763 | |||||
Sysco Corp, 3.3000%, 7/15/26 | 1,352,000 | 1,324,799 | |||||
Universal Health Services Inc, 4.7500%, 8/1/22 (144A) | 2,259,000 | 2,287,237 | |||||
Universal Health Services Inc, 5.0000%, 6/1/26 (144A) | 1,803,000 | 1,757,925 | |||||
Wm Wrigley Jr Co, 2.4000%, 10/21/18 (144A) | 3,822,000 | 3,855,485 | |||||
Wm Wrigley Jr Co, 3.3750%, 10/21/20 (144A) | 1,239,000 | 1,272,688 | |||||
66,675,878 | |||||||
Electric – 0.5% | |||||||
Dominion Resources Inc/VA, 2.0000%, 8/15/21 | 298,000 | 288,723 | |||||
Dominion Resources Inc/VA, 2.8500%, 8/15/26 | 412,000 | 385,145 | |||||
Duke Energy Corp, 1.8000%, 9/1/21 | 799,000 | 768,950 | |||||
Duke Energy Corp, 2.6500%, 9/1/26 | 1,249,000 | 1,163,942 | |||||
IPALCO Enterprises Inc, 5.0000%, 5/1/18 | 1,148,000 | 1,185,310 | |||||
PPL WEM Ltd / Western Power Distribution Ltd, 5.3750%, 5/1/21 (144A) | 2,118,000 | 2,283,566 | |||||
Southern Co, 2.3500%, 7/1/21 | 2,426,000 | 2,382,097 | |||||
Southern Co, 2.9500%, 7/1/23 | 1,736,000 | 1,711,217 | |||||
Southern Co, 3.2500%, 7/1/26 | 2,439,000 | 2,370,213 | |||||
12,539,163 | |||||||
Energy – 1.8% | |||||||
Anadarko Petroleum Corp, 4.8500%, 3/15/21 | 355,000 | 380,340 | |||||
Anadarko Petroleum Corp, 5.5500%, 3/15/26 | 2,215,000 | 2,475,929 | |||||
Antero Resources Corp, 5.3750%, 11/1/21 | 2,087,000 | 2,133,957 | |||||
Buckeye Partners LP, 3.9500%, 12/1/26 | 435,000 | 423,748 | |||||
Canadian Natural Resources Ltd, 5.7000%, 5/15/17 | 478,000 | 485,104 | |||||
Canadian Natural Resources Ltd, 5.9000%, 2/1/18 | 851,000 | 885,756 | |||||
Cenovus Energy Inc, 5.7000%, 10/15/19 | 54,000 | 57,739 | |||||
Cimarex Energy Co, 5.8750%, 5/1/22 | 1,753,000 | 1,822,084 | |||||
Cimarex Energy Co, 4.3750%, 6/1/24 | 592,000 | 614,960 | |||||
ConocoPhillips Co, 4.2000%, 3/15/21 | 1,632,000 | 1,732,143 | |||||
ConocoPhillips Co, 4.9500%, 3/15/26 | 2,049,000 | 2,259,088 | |||||
Diamond Offshore Drilling Inc, 5.8750%, 5/1/19 | 404,000 | 419,049 | |||||
Energy Transfer Partners LP, 4.1500%, 10/1/20 | 1,208,000 | 1,250,048 | |||||
Energy Transfer Partners LP, 4.7500%, 1/15/26 | 1,058,000 | 1,092,377 | |||||
Helmerich & Payne International Drilling Co, 4.6500%, 3/15/25 | 4,177,000 | 4,310,764 | |||||
Hess Corp, 4.3000%, 4/1/27 | 1,771,000 | 1,760,252 | |||||
Hiland Partners Holdings LLC / Hiland Partners Finance Corp, | |||||||
5.5000%, 5/15/22 (144A) | 1,161,000 | 1,212,200 | |||||
Kinder Morgan Energy Partners LP, 5.0000%, 10/1/21 | 1,107,000 | 1,177,661 | |||||
Kinder Morgan Energy Partners LP, 3.9500%, 9/1/22 | 1,184,000 | 1,214,358 | |||||
Kinder Morgan Inc/DE, 6.5000%, 9/15/20 | 115,000 | 128,836 | |||||
Motiva Enterprises LLC, 5.7500%, 1/15/20 (144A) | 1,636,000 | 1,766,860 | |||||
MPLX LP, 4.5000%, 7/15/23 | 514,000 | 521,509 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
14 | DECEMBER 31, 2016 |
Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Corporate Bonds – (continued) | |||||||
Energy – (continued) | |||||||
Oceaneering International Inc, 4.6500%, 11/15/24 | $2,572,000 | $2,533,896 | |||||
Phillips 66 Partners LP, 3.6050%, 2/15/25 | 1,324,000 | 1,295,040 | |||||
Plains All American Pipeline LP / PAA Finance Corp, 4.6500%, 10/15/25 | 2,604,000 | 2,686,833 | |||||
Regency Energy Partners LP / Regency Energy Finance Corp, 5.8750%, 3/1/22 | 1,530,000 | 1,681,546 | |||||
Sabine Pass Liquefaction LLC, 5.0000%, 3/15/27 (144A) | 2,614,000 | 2,636,872 | |||||
Spectra Energy Partners LP, 4.7500%, 3/15/24 | 2,846,000 | 3,018,192 | |||||
Tesoro Logistics LP / Tesoro Logistics Finance Corp, 5.2500%, 1/15/25 | 694,000 | 708,748 | |||||
Western Gas Partners LP, 5.3750%, 6/1/21 | 2,512,000 | 2,699,641 | |||||
Williams Cos Inc, 3.7000%, 1/15/23 | 729,000 | 703,485 | |||||
Williams Partners LP / ACMP Finance Corp, 4.8750%, 5/15/23 | 1,972,000 | 2,007,439 | |||||
Williams Partners LP / ACMP Finance Corp, 4.8750%, 3/15/24 | 183,000 | 184,637 | |||||
48,281,091 | |||||||
Finance Companies – 0.3% | |||||||
CIT Group Inc, 4.2500%, 8/15/17 | 4,903,000 | 4,964,287 | |||||
CIT Group Inc, 5.5000%, 2/15/19 (144A) | 1,443,000 | 1,522,365 | |||||
International Lease Finance Corp, 8.7500%, 3/15/17 | 1,081,000 | 1,095,864 | |||||
7,582,516 | |||||||
Financial Institutions – 0.5% | |||||||
Jones Lang LaSalle Inc, 4.4000%, 11/15/22 | 2,614,000 | 2,692,417 | |||||
Kennedy-Wilson Inc, 5.8750%, 4/1/24 | 4,445,000 | 4,528,344 | |||||
LeasePlan Corp NV, 2.5000%, 5/16/18 (144A) | 4,630,000 | 4,636,051 | |||||
11,856,812 | |||||||
Industrial – 0% | |||||||
Cintas Corp No 2, 4.3000%, 6/1/21 | 1,112,000 | 1,179,174 | |||||
Insurance – 0.4% | |||||||
Aetna Inc, 2.4000%, 6/15/21 | 1,495,000 | 1,486,896 | |||||
Aetna Inc, 2.8000%, 6/15/23 | 1,082,000 | 1,064,583 | |||||
Aetna Inc, 3.2000%, 6/15/26 | 4,670,000 | 4,613,073 | |||||
Berkshire Hathaway Inc, 3.1250%, 3/15/26 | 401,000 | 397,819 | |||||
CNO Financial Group Inc, 4.5000%, 5/30/20 | 627,000 | 642,675 | |||||
Voya Financial Inc, 5.6500%, 5/15/53‡ | 1,626,000 | 1,601,610 | |||||
9,806,656 | |||||||
Real Estate Investment Trusts (REITs) – 0.6% | |||||||
Alexandria Real Estate Equities Inc, 2.7500%, 1/15/20 | 1,136,000 | 1,132,679 | |||||
Alexandria Real Estate Equities Inc, 4.6000%, 4/1/22 | 3,249,000 | 3,433,943 | |||||
Alexandria Real Estate Equities Inc, 4.5000%, 7/30/29 | 1,760,000 | 1,757,928 | |||||
Post Apartment Homes LP, 4.7500%, 10/15/17 | 1,505,000 | 1,527,993 | |||||
Senior Housing Properties Trust, 6.7500%, 4/15/20 | 736,000 | 796,077 | |||||
Senior Housing Properties Trust, 6.7500%, 12/15/21 | 817,000 | 913,578 | |||||
SL Green Realty Corp, 5.0000%, 8/15/18 | 1,756,000 | 1,828,568 | |||||
SL Green Realty Corp, 7.7500%, 3/15/20 | 3,448,000 | 3,890,192 | |||||
15,280,958 | |||||||
Technology – 1.6% | |||||||
Cadence Design Systems Inc, 4.3750%, 10/15/24 | 4,105,000 | 4,020,322 | |||||
Fidelity National Information Services Inc, 3.6250%, 10/15/20 | 1,227,000 | 1,269,336 | |||||
Fidelity National Information Services Inc, 5.0000%, 3/15/22 | 540,000 | 554,888 | |||||
Fidelity National Information Services Inc, 4.5000%, 10/15/22 | 1,597,000 | 1,702,736 | |||||
Fidelity National Information Services Inc, 3.0000%, 8/15/26 | 2,056,000 | 1,930,559 | |||||
NXP BV / NXP Funding LLC, 4.1250%, 6/15/20 (144A) | 772,000 | 799,020 | |||||
NXP BV / NXP Funding LLC, 4.1250%, 6/1/21 (144A) | 501,000 | 517,283 | |||||
NXP BV / NXP Funding LLC, 3.8750%, 9/1/22 (144A) | 2,190,000 | 2,217,375 | |||||
NXP BV / NXP Funding LLC, 4.6250%, 6/1/23 (144A) | 1,207,000 | 1,267,350 | |||||
Seagate HDD Cayman, 4.7500%, 1/1/25 | 2,053,000 | 1,955,883 | |||||
Seagate HDD Cayman, 4.8750%, 6/1/27 | 670,000 | 602,958 | |||||
Seagate HDD Cayman, 5.7500%, 12/1/34 | 633,000 | 539,633 | |||||
Total System Services Inc, 3.8000%, 4/1/21 | 1,313,000 | 1,354,098 | |||||
Total System Services Inc, 4.8000%, 4/1/26 | 3,663,000 | 3,941,677 | |||||
Trimble Inc, 4.7500%, 12/1/24 | 4,541,000 | 4,593,208 | |||||
TSMC Global Ltd, 1.6250%, 4/3/18 (144A) | 6,273,000 | 6,247,651 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 15 |
Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Corporate Bonds – (continued) | |||||||
Technology – (continued) | |||||||
Verisk Analytics Inc, 4.8750%, 1/15/19 | $1,497,000 | $1,568,816 | |||||
Verisk Analytics Inc, 5.8000%, 5/1/21 | 2,531,000 | 2,813,910 | |||||
Verisk Analytics Inc, 4.1250%, 9/12/22 | 1,459,000 | 1,518,479 | |||||
Verisk Analytics Inc, 5.5000%, 6/15/45 | 1,716,000 | 1,821,561 | |||||
41,236,743 | |||||||
Transportation – 0.3% | |||||||
Penske Truck Leasing Co Lp / PTL Finance Corp, 3.3750%, 3/15/18 (144A) | 2,480,000 | 2,523,102 | |||||
Penske Truck Leasing Co Lp / PTL Finance Corp, 2.5000%, 6/15/19 (144A) | 1,598,000 | 1,601,469 | |||||
Penske Truck Leasing Co Lp / PTL Finance Corp, 4.8750%, 7/11/22 (144A) | 246,000 | 263,712 | |||||
Penske Truck Leasing Co Lp / PTL Finance Corp, 4.2500%, 1/17/23 (144A) | 1,357,000 | 1,408,012 | |||||
Southwest Airlines Co, 5.1250%, 3/1/17 | 1,589,000 | 1,598,221 | |||||
7,394,516 | |||||||
Total Corporate Bonds (cost $424,476,000) | 425,800,409 | ||||||
Inflation-Indexed Bonds – 0.6% | |||||||
United States Treasury Inflation Indexed Bonds, 0.1250%, 7/15/26ÇÇ (cost $15,167,870) | 15,644,007 | 15,125,377 | |||||
Mortgage-Backed Securities – 8.4% | |||||||
Fannie Mae Pool: | |||||||
6.0000%, 8/1/22 | 485,477 | 519,233 | |||||
5.5000%, 1/1/25 | 210,283 | 223,650 | |||||
4.0000%, 3/1/29 | 866,573 | 919,047 | |||||
4.0000%, 6/1/29 | 401,378 | 425,941 | |||||
4.0000%, 7/1/29 | 851,494 | 898,938 | |||||
4.0000%, 9/1/29 | 857,265 | 905,393 | |||||
5.0000%, 9/1/29 | 632,425 | 689,083 | |||||
3.5000%, 10/1/29 | 116,474 | 122,438 | |||||
5.0000%, 1/1/30 | 239,898 | 261,174 | |||||
4.0000%, 4/1/34 | 1,019,034 | 1,081,995 | |||||
6.0000%, 10/1/35 | 715,234 | 815,513 | |||||
6.0000%, 12/1/35 | 801,035 | 915,887 | |||||
6.0000%, 2/1/37 | 137,865 | 160,819 | |||||
6.0000%, 9/1/37 | 471,333 | 504,333 | |||||
6.0000%, 10/1/38 | 525,183 | 595,033 | |||||
7.0000%, 2/1/39 | 220,272 | 265,112 | |||||
5.5000%, 12/1/39 | 1,136,412 | 1,271,074 | |||||
5.5000%, 3/1/40 | 937,324 | 1,064,877 | |||||
5.5000%, 4/1/40 | 2,473,733 | 2,758,613 | |||||
4.5000%, 10/1/40 | 204,632 | 220,937 | |||||
5.0000%, 10/1/40 | 409,936 | 454,949 | |||||
5.5000%, 2/1/41 | 513,988 | 583,862 | |||||
5.0000%, 5/1/41 | 1,157,467 | 1,266,126 | |||||
5.5000%, 5/1/41 | 776,842 | 867,037 | |||||
5.5000%, 6/1/41 | 1,300,173 | 1,450,607 | |||||
5.5000%, 6/1/41 | 1,129,927 | 1,279,727 | |||||
5.5000%, 7/1/41 | 137,087 | 152,962 | |||||
4.5000%, 8/1/41 | 841,806 | 908,966 | |||||
5.5000%, 12/1/41 | 1,157,328 | 1,294,943 | |||||
4.5000%, 1/1/42 | 222,177 | 238,999 | |||||
5.5000%, 2/1/42 | 4,612,277 | 5,139,956 | |||||
4.0000%, 6/1/42 | 1,612,363 | 1,709,336 | |||||
4.5000%, 6/1/42 | 330,833 | 354,827 | |||||
3.5000%, 7/1/42 | 1,018,224 | 1,049,469 | |||||
4.0000%, 7/1/42 | 303,757 | 321,946 | |||||
4.0000%, 8/1/42 | 723,414 | 766,872 | |||||
4.0000%, 9/1/42 | 1,435,273 | 1,522,173 | |||||
4.0000%, 9/1/42 | 930,992 | 987,127 | |||||
4.0000%, 11/1/42 | 1,132,516 | 1,201,188 | |||||
4.5000%, 11/1/42 | 536,933 | 581,732 | |||||
4.0000%, 12/1/42 | 808,603 | 856,590 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
16 | DECEMBER 31, 2016 |
Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Mortgage-Backed Securities – (continued) | |||||||
Fannie Mae Pool – (continued) | |||||||
3.5000%, 1/1/43 | $1,956,775 | $2,016,842 | |||||
3.5000%, 2/1/43 | 4,247,601 | 4,377,899 | |||||
3.5000%, 2/1/43 | 3,959,735 | 4,081,524 | |||||
4.5000%, 3/1/43 | 1,579,965 | 1,746,261 | |||||
4.0000%, 5/1/43 | 2,439,172 | 2,586,265 | |||||
4.0000%, 8/1/43 | 2,863,904 | 3,036,977 | |||||
4.0000%, 9/1/43 | 696,125 | 737,992 | |||||
3.5000%, 1/1/44 | 3,425,218 | 3,535,522 | |||||
3.5000%, 1/1/44 | 1,528,702 | 1,577,711 | |||||
4.0000%, 2/1/44 | 1,913,920 | 2,029,999 | |||||
3.5000%, 4/1/44 | 1,748,415 | 1,801,936 | |||||
4.5000%, 5/1/44 | 187,334 | 204,698 | |||||
5.5000%, 5/1/44 | 1,057,148 | 1,179,348 | |||||
4.0000%, 6/1/44 | 2,359,887 | 2,502,802 | |||||
4.0000%, 7/1/44 | 4,391,094 | 4,664,327 | |||||
5.0000%, 7/1/44 | 2,556,067 | 2,848,495 | |||||
4.0000%, 8/1/44 | 2,800,327 | 2,974,690 | |||||
4.0000%, 8/1/44 | 1,074,649 | 1,141,619 | |||||
4.5000%, 8/1/44 | 2,926,458 | 3,193,709 | |||||
4.5000%, 10/1/44 | 2,202,092 | 2,400,107 | |||||
4.5000%, 10/1/44 | 1,244,823 | 1,350,196 | |||||
3.5000%, 2/1/45 | 3,515,483 | 3,623,717 | |||||
4.5000%, 3/1/45 | 2,170,585 | 2,354,371 | |||||
4.0000%, 5/1/45 | 1,675,445 | 1,778,876 | |||||
4.5000%, 5/1/45 | 1,875,920 | 2,044,556 | |||||
4.5000%, 5/1/45 | 1,224,143 | 1,339,040 | |||||
4.5000%, 6/1/45 | 1,130,944 | 1,235,782 | |||||
4.5000%, 9/1/45 | 752,928 | 816,742 | |||||
4.0000%, 10/1/45 | 3,795,470 | 4,017,796 | |||||
4.5000%, 10/1/45 | 2,482,919 | 2,737,432 | |||||
3.5000%, 12/1/45 | 1,105,898 | 1,139,110 | |||||
4.0000%, 12/1/45 | 1,554,039 | 1,649,969 | |||||
3.5000%, 1/1/46 | 2,939,963 | 3,027,705 | |||||
3.5000%, 1/1/46 | 2,503,681 | 2,578,424 | |||||
4.0000%, 1/1/46 | 715,890 | 758,190 | |||||
4.5000%, 2/1/46 | 3,389,115 | 3,695,427 | |||||
4.5000%, 2/1/46 | 1,433,187 | 1,556,797 | |||||
4.0000%, 4/1/46 | 1,900,866 | 2,020,450 | |||||
4.5000%, 4/1/46 | 1,821,708 | 1,997,999 | |||||
4.0000%, 5/1/46 | 2,300,818 | 2,437,527 | |||||
4.0000%, 6/1/46 | 785,574 | 833,482 | |||||
3.5000%, 7/1/46 | 2,001,984 | 2,059,013 | |||||
3.5000%, 7/1/46 | 1,983,163 | 2,042,590 | |||||
4.5000%, 7/1/46 | 1,439,358 | 1,561,021 | |||||
3.5000%, 8/1/46 | 1,209,201 | 1,241,277 | |||||
136,144,696 | |||||||
Freddie Mac Gold Pool: | |||||||
5.0000%, 6/1/20 | 184,638 | 193,016 | |||||
5.5000%, 12/1/28 | 533,549 | 591,090 | |||||
3.5000%, 7/1/29 | 1,076,720 | 1,125,394 | |||||
8.0000%, 4/1/32 | 273,293 | 345,133 | |||||
5.5000%, 10/1/36 | 466,216 | 528,908 | |||||
6.0000%, 4/1/40 | 2,393,727 | 2,793,717 | |||||
5.5000%, 5/1/41 | 1,040,481 | 1,154,068 | |||||
5.5000%, 8/1/41 | 2,308,856 | 2,650,875 | |||||
5.5000%, 8/1/41 | 1,548,977 | 1,758,479 | |||||
5.5000%, 9/1/41 | 350,105 | 388,267 | |||||
5.0000%, 3/1/42 | 1,126,652 | 1,252,013 | |||||
3.5000%, 2/1/44 | 1,380,583 | 1,421,364 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 17 |
Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Mortgage-Backed Securities – (continued) | |||||||
Freddie Mac Gold Pool – (continued) | |||||||
4.5000%, 5/1/44 | $1,326,622 | $1,440,689 | |||||
5.0000%, 7/1/44 | 965,142 | 1,070,463 | |||||
4.0000%, 8/1/44 | 884,262 | 936,189 | |||||
4.5000%, 9/1/44 | 4,233,373 | 4,631,682 | |||||
4.5000%, 6/1/45 | 1,908,753 | 2,088,678 | |||||
4.5000%, 2/1/46 | 2,108,667 | 2,307,900 | |||||
4.5000%, 2/1/46 | 1,313,327 | 1,424,728 | |||||
3.5000%, 7/1/46 | 3,987,574 | 4,101,446 | |||||
32,204,099 | |||||||
Ginnie Mae I Pool: | |||||||
5.1000%, 1/15/32 | 992,301 | 1,132,089 | |||||
7.5000%, 8/15/33 | 980,218 | 1,144,626 | |||||
4.9000%, 10/15/34 | 1,086,692 | 1,239,120 | |||||
5.5000%, 9/15/35 | 119,275 | 137,052 | |||||
5.5000%, 3/15/36 | 494,997 | 558,621 | |||||
5.5000%, 2/15/39 | 720,656 | 812,074 | |||||
5.5000%, 8/15/39 | 2,126,547 | 2,470,664 | |||||
5.5000%, 8/15/39 | 691,191 | 802,946 | |||||
5.0000%, 10/15/39 | 460,161 | 509,124 | |||||
5.5000%, 10/15/39 | 787,448 | 897,675 | |||||
5.0000%, 11/15/39 | 728,383 | 799,354 | |||||
5.0000%, 1/15/40 | 251,084 | 276,284 | |||||
5.0000%, 5/15/40 | 268,534 | 298,813 | |||||
5.0000%, 5/15/40 | 105,011 | 116,982 | |||||
5.0000%, 7/15/40 | 774,740 | 850,491 | |||||
5.0000%, 7/15/40 | 224,968 | 247,371 | |||||
5.0000%, 2/15/41 | 816,270 | 900,405 | |||||
5.0000%, 4/15/41 | 319,359 | 351,216 | |||||
4.5000%, 5/15/41 | 1,528,900 | 1,725,419 | |||||
5.0000%, 5/15/41 | 308,690 | 343,225 | |||||
4.5000%, 7/15/41 | 728,898 | 828,766 | |||||
4.5000%, 7/15/41 | 231,574 | 256,700 | |||||
4.5000%, 8/15/41 | 2,081,336 | 2,298,614 | |||||
5.0000%, 9/15/41 | 202,314 | 226,325 | |||||
5.0000%, 11/15/43 | 1,449,497 | 1,627,991 | |||||
4.5000%, 5/15/44 | 948,750 | 1,039,086 | |||||
5.0000%, 6/15/44 | 1,454,901 | 1,625,324 | |||||
5.0000%, 6/15/44 | 517,778 | 577,508 | |||||
5.0000%, 7/15/44 | 595,227 | 663,529 | |||||
4.0000%, 1/15/45 | 4,659,118 | 4,978,743 | |||||
4.0000%, 4/15/45 | 760,796 | 826,587 | |||||
4.0000%, 7/15/46 | 2,882,732 | 3,123,211 | |||||
4.5000%, 8/15/46 | 5,088,169 | 5,573,640 | |||||
39,259,575 | |||||||
Ginnie Mae II Pool: | |||||||
6.0000%, 11/20/34 | 463,821 | 540,638 | |||||
5.5000%, 11/20/37 | 513,410 | 573,688 | |||||
6.0000%, 1/20/39 | 192,261 | 215,763 | |||||
7.0000%, 5/20/39 | 107,331 | 126,206 | |||||
4.5000%, 10/20/41 | 1,335,590 | 1,426,579 | |||||
6.0000%, 12/20/41 | 219,458 | 250,950 | |||||
5.5000%, 1/20/42 | 486,470 | 542,439 | |||||
6.0000%, 1/20/42 | 223,306 | 254,145 | |||||
6.0000%, 2/20/42 | 182,561 | 206,747 | |||||
6.0000%, 3/20/42 | 159,696 | 182,077 | |||||
6.0000%, 4/20/42 | 630,036 | 723,484 | |||||
3.5000%, 5/20/42 | 513,710 | 538,107 | |||||
5.5000%, 5/20/42 | 654,621 | 725,518 | |||||
6.0000%, 5/20/42 | 266,716 | 303,162 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
18 | DECEMBER 31, 2016 |
Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Mortgage-Backed Securities – (continued) | |||||||
Ginnie Mae II Pool – (continued) | |||||||
5.5000%, 7/20/42 | $814,248 | $892,334 | |||||
6.0000%, 7/20/42 | 171,770 | 192,411 | |||||
6.0000%, 8/20/42 | 188,011 | 214,973 | |||||
6.0000%, 9/20/42 | 397,398 | 454,796 | |||||
6.0000%, 11/20/42 | 166,939 | 190,462 | |||||
6.0000%, 2/20/43 | 244,201 | 278,998 | |||||
3.5000%, 9/20/44 | 1,482,632 | 1,553,165 | |||||
5.0000%, 12/20/44 | 843,224 | 949,454 | |||||
5.0000%, 9/20/45 | 594,287 | 669,809 | |||||
4.0000%, 10/20/45 | 1,861,953 | 2,006,894 | |||||
14,012,799 | |||||||
Total Mortgage-Backed Securities (cost $222,933,918) | 221,621,169 | ||||||
United States Treasury Notes/Bonds – 3.1% | |||||||
0.7500%, 10/31/18 | 9,315,000 | 9,246,302 | |||||
1.0000%, 11/30/18 | 15,932,000 | 15,877,688 | |||||
1.0000%, 11/15/19 | 9,356,000 | 9,238,947 | |||||
1.2500%, 10/31/21 | 9,498,000 | 9,200,931 | |||||
2.5000%, 5/15/24 | 3,752,000 | 3,803,312 | |||||
2.0000%, 2/15/25 | 1,244,000 | 1,209,098 | |||||
2.2500%, 11/15/25 | 15,906,000 | 15,679,212 | |||||
1.6250%, 2/15/26 | 2,463,000 | 2,297,834 | |||||
2.2500%, 8/15/46 | 11,620,000 | 9,745,357 | |||||
2.8750%, 11/15/46 | 5,473,000 | 5,271,019 | |||||
Total United States Treasury Notes/Bonds (cost $81,918,255) | 81,569,700 | ||||||
Common Stocks – 62.6% | |||||||
Aerospace & Defense – 4.7% | |||||||
Boeing Co | 434,103 | 67,581,155 | |||||
General Dynamics Corp | 151,160 | 26,099,286 | |||||
Northrop Grumman Corp | 123,642 | 28,756,656 | |||||
122,437,097 | |||||||
Air Freight & Logistics – 0.7% | |||||||
United Parcel Service Inc | 169,208 | 19,398,005 | |||||
Automobiles – 1.6% | |||||||
General Motors Co | 1,219,565 | 42,489,645 | |||||
Banks – 1.3% | |||||||
US Bancorp | 641,779 | 32,968,187 | |||||
Biotechnology – 2.9% | |||||||
AbbVie Inc | 315,195 | 19,737,511 | |||||
Amgen Inc | 393,035 | 57,465,647 | |||||
77,203,158 | |||||||
Capital Markets – 5.7% | |||||||
Blackstone Group LP | 921,150 | 24,898,684 | |||||
CME Group Inc | 480,888 | 55,470,431 | |||||
Morgan Stanley | 820,498 | 34,666,040 | |||||
TD Ameritrade Holding Corp | 820,830 | 35,788,188 | |||||
150,823,343 | |||||||
Chemicals – 2.0% | |||||||
LyondellBasell Industries NV | 625,634 | 53,666,885 | |||||
Construction Materials – 0.3% | |||||||
Vulcan Materials Co | 67,854 | 8,491,928 | |||||
Consumer Finance – 1.7% | |||||||
Synchrony Financial | 1,219,991 | 44,249,074 | |||||
Equity Real Estate Investment Trusts (REITs) – 1.6% | |||||||
Colony Starwood Homes | 177,602 | 5,116,714 | |||||
Crown Castle International Corp | 133,312 | 11,567,482 | |||||
MGM Growth Properties LLC | 313,241 | 7,928,130 | |||||
Outfront Media Inc | 658,277 | 16,371,349 | |||||
40,983,675 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 19 |
Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Common Stocks – (continued) | |||||||
Food & Staples Retailing – 3.1% | |||||||
Costco Wholesale Corp | 308,209 | $49,347,343 | |||||
Kroger Co | 537,866 | 18,561,756 | |||||
Sysco Corp | 248,168 | 13,741,062 | |||||
81,650,161 | |||||||
Food Products – 0.9% | |||||||
Hershey Co | 233,058 | 24,105,189 | |||||
Health Care Equipment & Supplies – 1.3% | |||||||
Medtronic PLC | 465,833 | 33,181,285 | |||||
Health Care Providers & Services – 0.8% | |||||||
Aetna Inc | 178,655 | 22,155,007 | |||||
Hotels, Restaurants & Leisure – 2.3% | |||||||
McDonald's Corp | 74,990 | 9,127,783 | |||||
Norwegian Cruise Line Holdings Ltd* | 358,846 | 15,261,720 | |||||
Six Flags Entertainment Corp | 235,666 | 14,130,533 | |||||
Starbucks Corp | 408,431 | 22,676,089 | |||||
61,196,125 | |||||||
Household Products – 0.8% | |||||||
Kimberly-Clark Corp | 190,485 | 21,738,148 | |||||
Industrial Conglomerates – 1.6% | |||||||
Honeywell International Inc | 358,941 | 41,583,315 | |||||
Information Technology Services – 4.0% | |||||||
Accenture PLC | 193,330 | 22,644,743 | |||||
Automatic Data Processing Inc | 145,490 | 14,953,462 | |||||
Mastercard Inc | 649,881 | 67,100,213 | |||||
104,698,418 | |||||||
Internet & Direct Marketing Retail – 1.4% | |||||||
Priceline Group Inc* | 25,357 | 37,174,883 | |||||
Internet Software & Services – 2.0% | |||||||
Alphabet Inc - Class C* | 69,254 | 53,451,622 | |||||
Leisure Products – 1.0% | |||||||
Hasbro Inc | 158,615 | 12,338,661 | |||||
Mattel Inc | 494,819 | 13,632,263 | |||||
25,970,924 | |||||||
Media – 2.7% | |||||||
Comcast Corp | 610,729 | 42,170,837 | |||||
Madison Square Garden Co* | 38,190 | 6,549,967 | |||||
Time Warner Inc | 226,142 | 21,829,487 | |||||
70,550,291 | |||||||
Mortgage Real Estate Investment Trusts (REITs) – 0.7% | |||||||
Colony Capital Inc | 848,187 | 17,175,787 | |||||
Multiline Retail – 0.8% | |||||||
Dollar Tree Inc* | 282,240 | 21,783,283 | |||||
Personal Products – 0.5% | |||||||
Estee Lauder Cos Inc | 165,534 | 12,661,696 | |||||
Pharmaceuticals – 2.3% | |||||||
Allergan plc | 62,663 | 13,159,857 | |||||
Bristol-Myers Squibb Co | 682,610 | 39,891,728 | |||||
Eli Lilly & Co | 104,116 | 7,657,732 | |||||
60,709,317 | |||||||
Real Estate Management & Development – 0.9% | |||||||
CBRE Group Inc* | 743,516 | 23,413,319 | |||||
Colony American Homes III§ | 639,963 | 660,096 | |||||
24,073,415 | |||||||
Road & Rail – 1.2% | |||||||
CSX Corp | 850,647 | 30,563,747 | |||||
Software – 4.7% | |||||||
Adobe Systems Inc* | 392,855 | 40,444,422 | |||||
Microsoft Corp | 1,345,018 | 83,579,419 | |||||
124,023,841 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
20 | DECEMBER 31, 2016 |
Janus Aspen Balanced Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Common Stocks – (continued) | |||||||
Specialty Retail – 1.3% | |||||||
Home Depot Inc | 263,246 | $35,296,024 | |||||
Technology Hardware, Storage & Peripherals – 1.5% | |||||||
Apple Inc | 334,535 | 38,745,844 | |||||
Textiles, Apparel & Luxury Goods – 1.9% | |||||||
NIKE Inc | 991,842 | 50,415,329 | |||||
Tobacco – 2.4% | |||||||
Altria Group Inc | 921,772 | 62,330,223 | |||||
Total Common Stocks (cost $1,360,238,161) | 1,647,944,871 | ||||||
Preferred Stocks – 0.3% | |||||||
Banks – 0.1% | |||||||
Citigroup Capital XIII, 7.2573% | 162,000 | 4,182,840 | |||||
Capital Markets – 0.1% | |||||||
Morgan Stanley, 6.8750% | 30,000 | 811,200 | |||||
Morgan Stanley, 7.1250% | 32,000 | 900,160 | |||||
1,711,360 | |||||||
Consumer Finance – 0.1% | |||||||
Discover Financial Services, 6.5000% | 95,000 | 2,439,600 | |||||
Industrial Conglomerates – 0% | |||||||
General Electric Co, 4.7000% | 10,000 | 245,600 | |||||
Total Preferred Stocks (cost $8,456,393) | 8,579,400 | ||||||
Investment Companies – 0.6% | |||||||
Money Markets – 0.6% | |||||||
Janus Cash Liquidity Fund LLC, 0.4708%ºº,£ (cost $14,816,076) | 14,816,076 | 14,816,076 | |||||
U.S. Government Agency Notes – 3.7% | |||||||
United States Treasury Bill: | |||||||
0%, 3/16/17◊ | $14,829,000 | 14,814,171 | |||||
0%, 6/22/17◊ | 795,000 | 792,675 | |||||
0%, 11/9/17◊ | 83,318,000 | 82,764,445 | |||||
Total U.S. Government Agency Notes (cost $98,427,547) | 98,371,291 | ||||||
Total Investments (total cost $2,344,956,861) – 100.0% | 2,632,025,092 | ||||||
Liabilities, net of Cash, Receivables and Other Assets – (0)% | (314,073) | ||||||
Net Assets – 100% | $2,631,711,019 |
Summary of Investments by Country - (Long Positions) (unaudited) | |||||
% of | |||||
Investment | |||||
Country | Value | Securities | |||
United States | $2,575,873,747 | 97.9 | % | ||
Belgium | 11,833,389 | 0.4 | |||
Netherlands | 9,437,079 | 0.4 | |||
United Kingdom | 8,330,767 | 0.3 | |||
Taiwan | 6,247,651 | 0.2 | |||
Singapore | 5,840,098 | 0.2 | |||
France | 5,046,363 | 0.2 | |||
Canada | 4,233,599 | 0.2 | |||
Switzerland | 2,607,552 | 0.1 | |||
Germany | 2,215,966 | 0.1 | |||
Luxembourg | 195,058 | 0.0 | |||
Hong Kong | 163,823 | 0.0 |
Total | $2,632,025,092 | 100.0 | % |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 21 |
Janus Aspen Balanced Portfolio
Notes to Schedule of Investments and Other Information
Balanced Index | An internally-calculated, hypothetical combination of total returns from the S&P 500® Index (55%) and the Bloomberg Barclays U.S. Aggregate Bond Index (45%). |
Bloomberg Barclays U.S. Aggregate Bond Index | Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based measure of the investment grade, US dollar-denominated, fixed-rate taxable bond market. |
S&P 500® Index | Measures broad U.S. equity performance. |
LLC | Limited Liability Company |
LP | Limited Partnership |
PLC | Public Limited Company |
ULC | Unlimited Liability Company |
144A | Securities sold under Rule 144A of the Securities Act of 1933, as amended, are subject to legal and/or contractual restrictions on resale and may not be publicly sold without registration under the 1933 Act. Unless otherwise noted, these securities have been determined to be liquid under guidelines established by the Board of Trustees. The total value of 144A securities as of the year ended December 31, 2016 is $136,677,294, which represents 5.2% of net assets. |
* | Non-income producing security. |
(a) | All or a portion of this position has not settled, or is not funded. Upon settlement or funding date, interest rates for unsettled or unfunded amounts will be determined. Interest and dividends will not be accrued until time of settlement or funding. |
‡ | The interest rate on floating rate notes is based on an index or market interest rates and is subject to change. Rate in the security description is as of December 31, 2016. |
ÇÇ | Security is a U.S. Treasury Inflation-Protected Security (TIPS). |
ºº | Rate shown is the 7-day yield as of December 31, 2016. |
µ | This variable rate security is a perpetual bond. Perpetual bonds have no contractual maturity date, are not redeemable, and pay an indefinite stream of interest. The coupon rate shown represents the current interest rate. |
Ç | Step bond. The coupon rate will increase or decrease periodically based upon a predetermined schedule. The rate shown reflects the current rate. |
◊ | Zero coupon bond. |
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. The following securities were considered affiliated companies for all or some portion of the year ended December 31, 2016. Unless otherwise indicated, all information in the table is for the year ended December 31, 2016. |
Share | Share | |||||||||||||
Balance | Balance | Realized | Dividend | Value | ||||||||||
at 12/31/15 | Purchases | Sales | at 12/31/16 | Gain/(Loss) | Income | at 12/31/16 | ||||||||
Janus Cash Liquidity Fund LLC | 66,697,739 | 853,176,126 | (905,057,789) | 14,816,076 | $— | $102,020 | $14,816,076 |
22 | DECEMBER 31, 2016 |
Janus Aspen Balanced Portfolio
Notes to Schedule of Investments and Other Information
§ | Schedule of Restricted and Illiquid Securities (as of December 31, 2016) | |||||||||
Value as a | ||||||||||
Acquisition | % of Net | |||||||||
Date | Cost | Value | Assets | |||||||
Colony American Homes III | 1/30/13 | $ | 803,249 | $ | 660,096 | 0.0 | % | |||
FREMF 2010 K-SCT Mortgage Trust, 2.0000%, 1/25/20 | 4/29/13 | 1,024,179 | 1,025,499 | 0.1 | ||||||
Total | $ | 1,827,428 | $ | 1,685,595 | 0.1 | % | ||||
The Portfolio has registration rights for certain restricted securities held as of December 31, 2016. The issuer incurs all registration costs. |
The following is a summary of the inputs that were used to value the Portfolio’s investments in securities and other financial instruments as of December 31, 2016. See Notes to Financial Statements for more information. | ||||||||||||
Valuation Inputs Summary | ||||||||||||
Level 2 - | Level 3 - | |||||||||||
Level 1 - | Other Significant | Significant | ||||||||||
Quotes Prices | Observable Inputs | Unobservable Inputs | ||||||||||
Assets | ||||||||||||
Investments in Securities | ||||||||||||
Asset-Backed/Commercial Mortgage-Backed Securities | $ | - | $ | 70,796,665 | $ | - | ||||||
Bank Loans and Mezzanine Loans | - | 47,400,134 | - | |||||||||
Corporate Bonds | - | 425,800,409 | - | |||||||||
Inflation-Indexed Bonds | - | 15,125,377 | - | |||||||||
Mortgage-Backed Securities | - | 221,621,169 | - | |||||||||
United States Treasury Notes/Bonds | - | 81,569,700 | - | |||||||||
Common Stocks | ||||||||||||
Real Estate Management & Development | 23,413,319 | - | 660,096 | |||||||||
All Other | 1,623,871,456 | - | - | |||||||||
Preferred Stocks | - | 8,579,400 | - | |||||||||
Investment Companies | - | 14,816,076 | - | |||||||||
U.S. Government Agency Notes | - | 98,371,291 | - | |||||||||
Total Assets | $ | 1,647,284,775 | $ | 984,080,221 | $ | 660,096 | ||||||
Janus Aspen Series | 23 |
Janus Aspen Balanced Portfolio
Statement of Assets and Liabilities
December 31, 2016
|
|
|
|
|
|
|
Assets: | ||||||
Investments, at cost | $ | 2,344,956,861 | ||||
Unaffiliated investments, at value | 2,617,209,016 | |||||
Affiliated investments, at value | 14,816,076 | |||||
Cash | 163,894 | |||||
Non-interested Trustees' deferred compensation | 48,834 | |||||
Receivables: | ||||||
Investments sold | 13,217,048 | |||||
Interest | 6,191,069 | |||||
Dividends | 3,594,331 | |||||
Portfolio shares sold | 735,119 | |||||
Foreign tax reclaims | 15,227 | |||||
Dividends from affiliates | 12,677 | |||||
Other assets | 29,568 | |||||
Total Assets |
|
| 2,656,032,859 |
| ||
Liabilities: | ||||||
Payables: | — | |||||
Investments purchased | 21,866,926 | |||||
Advisory fees | 1,280,167 | |||||
12b-1 Distribution and shareholder servicing fees | 490,370 | |||||
Portfolio shares repurchased | 402,781 | |||||
Transfer agent fees and expenses | 120,625 | |||||
Non-interested Trustees' deferred compensation fees | 48,834 | |||||
Professional fees | 34,908 | |||||
Portfolio administration fees | 22,112 | |||||
Non-interested Trustees' fees and expenses | 19,364 | |||||
Custodian fees | 3,336 | |||||
Accrued expenses and other payables | 32,417 | |||||
Total Liabilities |
|
| 24,321,840 |
| ||
Net Assets |
| $ | 2,631,711,019 |
| ||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus) | $ | 2,333,790,025 | ||||
Undistributed net investment income/(loss) | 12,374,394 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions | (1,525,749) | |||||
Unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 287,072,349 | |||||
Total Net Assets |
| $ | 2,631,711,019 |
| ||
Net Assets - Institutional Shares | $ | 403,833,121 | ||||
Shares Outstanding, $0.01 Par Value (unlimited shares authorized) | 13,319,900 | |||||
Net Asset Value Per Share |
| $ | 30.32 |
| ||
Net Assets - Service Shares | $ | 2,227,877,898 | ||||
Shares Outstanding, $0.01 Par Value (unlimited shares authorized) | 69,869,257 | |||||
Net Asset Value Per Share |
| $ | 31.89 |
|
See Notes to Financial Statements. | |
24 | DECEMBER 31, 2016 |
Janus Aspen Balanced Portfolio
Statement of Operations
For the year ended December 31, 2016
|
|
|
|
|
|
Investment Income: | |||||
| Dividends | $ | 33,322,318 | ||
Interest | 26,917,930 | ||||
Dividends from affiliates | 102,020 | ||||
Other income | 262,233 | ||||
Total Investment Income |
| 60,604,501 |
| ||
Expenses: | |||||
Advisory fees | 12,909,963 | ||||
12b-1Distribution and shareholder servicing fees: | |||||
Service Shares | 4,838,431 | ||||
Transfer agent administrative fees and expenses: | |||||
Institutional Shares | 138,695 | ||||
Service Shares | 676,687 | ||||
Other transfer agent fees and expenses: | |||||
Institutional Shares | 7,144 | ||||
Service Shares | 18,459 | ||||
Portfolio administration fees | 211,812 | ||||
Professional fees | 85,664 | ||||
Non-interested Trustees’ fees and expenses | 75,012 | ||||
Shareholder reports expense | 57,021 | ||||
Custodian fees | 28,775 | ||||
Registration fees | 20,144 | ||||
Other expenses | 408,412 | ||||
Total Expenses |
| 19,476,219 |
| ||
Net Investment Income/(Loss) |
| 41,128,282 |
| ||
Net Realized Gain/(Loss) on Investments: | |||||
Investments and foreign currency transactions | 3,486,187 | ||||
Total Net Realized Gain/(Loss) on Investments |
| 3,486,187 |
| ||
Change in Unrealized Net Appreciation/Depreciation: | |||||
Investments, foreign currency translations and non-interested Trustees’ deferred compensation | 58,375,166 | ||||
Total Change in Unrealized Net Appreciation/Depreciation |
| 58,375,166 |
| ||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 102,989,635 |
| ||
See Notes to Financial Statements. | |
Janus Aspen Series | 25 |
Janus Aspen Balanced Portfolio
Statements of Changes in Net Assets
|
|
| Year ended |
| Year ended | |||
Operations: | ||||||||
Net investment income/(loss) | $ | 41,128,282 | $ | 38,891,345 | ||||
Net realized gain/(loss) on investments | 3,486,187 | 25,746,146 | ||||||
Change in unrealized net appreciation/depreciation | 58,375,166 | (59,661,731) | ||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations |
| 102,989,635 |
|
| 4,975,760 | |||
Dividends and Distributions to Shareholders: | ||||||||
Dividends from Net Investment Income | ||||||||
Institutional Shares | (9,062,439) | (7,464,551) | ||||||
Service Shares | (39,619,594) | (23,906,755) | ||||||
| Total Dividends from Net Investment Income |
| (48,682,033) |
|
| (31,371,306) | ||
Distributions from Net Realized Gain from Investment Transactions | ||||||||
Institutional Shares | (6,034,450) | (15,890,685) | ||||||
Service Shares | (26,828,177) | (54,459,823) | ||||||
| Total Distributions from Net Realized Gain from Investment Transactions | (32,862,627) |
|
| (70,350,508) | |||
Net Decrease from Dividends and Distributions to Shareholders |
| (81,544,660) |
|
| (101,721,814) | |||
Capital Share Transactions: | ||||||||
Institutional Shares | (42,473,989) | (11,017,373) | ||||||
Service Shares | 376,338,116 | 680,114,575 | ||||||
Net Increase/(Decrease) from Capital Share Transactions |
| 333,864,127 |
|
| 669,097,202 | |||
Net Increase/(Decrease) in Net Assets |
| 355,309,102 |
|
| 572,351,148 | |||
Net Assets: | ||||||||
Beginning of period | 2,276,401,917 | 1,704,050,769 | ||||||
| End of period | $ | 2,631,711,019 |
| $ | 2,276,401,917 | ||
Undistributed Net Investment Income/(Loss) | $ | 12,374,394 |
| $ | 20,123,919 |
See Notes to Financial Statements. | |
26 | DECEMBER 31, 2016 |
Janus Aspen Balanced Portfolio
Financial Highlights
Institutional Shares | ||||||||||||||||||
For a share outstanding during each year ended December 31 |
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
| |||
Net Asset Value, Beginning of Period |
| $30.08 |
|
| $31.43 |
|
| $30.26 |
|
| $27.17 |
|
| $26.62 |
| |||
Income/(Loss) from Investment Operations: | ||||||||||||||||||
Net investment income/(loss) | 0.58(1) | 0.63(1) | 0.62(1) | 0.56 | 1.14 | |||||||||||||
Net realized and unrealized gain/(loss) | 0.77 | (0.41) | 1.92 | 4.67 | 2.30 | |||||||||||||
Total from Investment Operations |
| 1.35 |
|
| 0.22 |
|
| 2.54 |
|
| 5.23 |
|
| 3.44 |
| |||
Less Dividends and Distributions: | ||||||||||||||||||
Dividends (from net investment income) | (0.67) | (0.50) | (0.55) | (0.45) | (0.80) | |||||||||||||
Distributions (from capital gains) | (0.44) | (1.07) | (0.82) | (1.69) | (2.09) | |||||||||||||
Total Dividends and Distributions |
| (1.11) |
|
| (1.57) |
|
| (1.37) |
|
| (2.14) |
|
| (2.89) |
| |||
Net Asset Value, End of Period | $30.32 | $30.08 | $31.43 | $30.26 | $27.17 | |||||||||||||
Total Return* |
| 4.60% |
|
| 0.62% |
|
| 8.54% |
|
| 20.11% |
|
| 13.66% |
| |||
Net Assets, End of Period (in thousands) | $403,833 | $444,472 | $475,807 | $475,100 | $435,689 | |||||||||||||
Average Net Assets for the Period (in thousands) | $413,338 | $467,346 | $472,445 | $455,356 | $509,335 | |||||||||||||
Ratios to Average Net Assets**: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Ratio of Gross Expenses | 0.62% | 0.58% | 0.58% | 0.58% | 0.60% | |||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) | 0.62% | 0.58% | 0.58% | 0.58% | 0.60% | |||||||||||||
Ratio of Net Investment Income/(Loss) | 1.94% | 2.03% | 2.01% | 1.87% | 2.23% | |||||||||||||
Portfolio Turnover Rate | 80% | 73% | 87% | 76% | 77% | |||||||||||||
1 |
Service Shares | ||||||||||||||||||
For a share outstanding during each year ended December 31 |
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
| |||
Net Asset Value, Beginning of Period |
| $31.61 |
|
| $32.97 |
|
| $31.72 |
|
| $28.42 |
|
| $27.74 |
| |||
Income/(Loss) from Investment Operations: | ||||||||||||||||||
Net investment income/(loss) | 0.53(1) | 0.58(1) | 0.57(1) | 0.58 | 0.57 | |||||||||||||
Net realized and unrealized gain/(loss) | 0.80 | (0.42) | 2.00 | 4.82 | 2.94 | |||||||||||||
Total from Investment Operations |
| 1.33 |
|
| 0.16 |
|
| 2.57 |
|
| 5.40 |
|
| 3.51 |
| |||
Less Dividends and Distributions: | ||||||||||||||||||
Dividends (from net investment income) | (0.61) | (0.45) | (0.50) | (0.41) | (0.74) | |||||||||||||
Distributions (from capital gains) | (0.44) | (1.07) | (0.82) | (1.69) | (2.09) | |||||||||||||
Total Dividends and Distributions |
| (1.05) |
|
| (1.52) |
|
| (1.32) |
|
| (2.10) |
|
| (2.83) |
| |||
Net Asset Value, End of Period | $31.89 | $31.61 | $32.97 | $31.72 | $28.42 | |||||||||||||
Total Return* |
| 4.32% |
|
| 0.41% |
|
| 8.24% |
|
| 19.80% |
|
| 13.37% |
| |||
Net Assets, End of Period (in thousands) | $2,227,878 | $1,831,930 | $1,228,244 | $863,259 | $494,722 | |||||||||||||
Average Net Assets for the Period (in thousands) | $1,938,234 | $1,645,283 | $1,013,680 | $596,154 | $533,254 | |||||||||||||
Ratios to Average Net Assets**: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Ratio of Gross Expenses | 0.87% | 0.84% | 0.84% | 0.84% | 0.85% | |||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) | 0.87% | 0.84% | 0.84% | 0.84% | 0.85% | |||||||||||||
Ratio of Net Investment Income/(Loss) | 1.71% | 1.79% | 1.77% | 1.62% | 2.00% | |||||||||||||
Portfolio Turnover Rate | 80% | 73% | 87% | 76% | 77% | |||||||||||||
* Total return not annualized for periods of less than one full year. ** Annualized for periods of less than one full year. (1) Per share amounts are calculated based on average shares outstanding during the year or period. |
See Notes to Financial Statements. | |
Janus Aspen Series | 27 |
Janus Aspen Balanced Portfolio
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Janus Aspen Balanced Portfolio (the “Portfolio”) is a series fund. The Portfolio is part of Janus Aspen Series (the “Trust”), which is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and therefore has applied the specialized accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. The Trust offers twelve portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio seeks long-term capital growth, consistent with preservation of capital and balanced by current income. The Portfolio is classified as diversified, as defined in the 1940 Act.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Each class represents an interest in the same portfolio of investments. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
Shareholders, including other portfolios, participating insurance companies, as well as accounts, may from time to time own (beneficially or of record) a significant percentage of the Portfolio’s Shares and can be considered to “control” the Portfolio when that ownership exceeds 25% of the Portfolio’s assets (and which may differ from control as determined in accordance with accounting principles generally accepted in the United States of America).
The following accounting policies have been followed by the Portfolio and are in conformity with accounting principles generally accepted in the United States of America.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is no current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). The Portfolio will determine the market value of individual securities held by it by using prices provided by one or more approved professional pricing services or, as needed, by obtaining market quotations from independent broker-dealers. Most debt securities are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Certain short-term securities maturing within 60 days or less may be evaluated and valued on an amortized cost basis provided that the amortized cost determined approximates market value. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. Special valuation considerations may apply with respect to “odd-lot” fixed-income transactions which, due to their small size, may receive evaluated prices by pricing services which reflect a large block trade and not what actually could be obtained for the odd-lot position. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Valuation Inputs Summary
FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements regarding fair value measurements. This standard
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emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability and establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. These inputs are summarized into three broad levels:
Level 1 – Unadjusted quoted prices in active markets the Portfolio has the ability to access for identical assets or liabilities.
Level 2 – Observable inputs other than unadjusted quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Assets or liabilities categorized as Level 2 in the hierarchy generally include: debt securities fair valued in accordance with the evaluated bid or ask prices supplied by a pricing service; securities traded on OTC markets and listed securities for which no sales are reported that are fair valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees; certain short-term debt securities with maturities of 60 days or less that are fair valued at amortized cost; and equity securities of foreign issuers whose fair value is determined by using systematic fair valuation models provided by independent third parties in order to adjust for stale pricing which may occur between the close of certain foreign exchanges and the close of the NYSE. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, swaps, investments in unregistered investment companies, options, and forward contracts.
Level 3 – Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the Portfolio’s own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for fair valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2016 to fair value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
The Portfolio did not hold a significant amount of Level 3 securities as of December 31, 2016.
There were no transfers between Level 1, Level 2 and Level 3 of the fair value hierarchy during the year. The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Portfolio is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and
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liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into contracts that contain provisions for indemnification of other parties against certain potential liabilities. The Portfolio’s maximum exposure under these arrangements is unknown, and would involve future claims that may be made against the Portfolio that have not yet occurred. Currently, the risk of material loss from such claims is considered remote.
Foreign Currency Translations
The Portfolio does not isolate that portion of the results of operations resulting from the effect of changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held at the date of the financial statements. Net unrealized appreciation or depreciation of investments and foreign currency translations arise from changes in the value of assets and liabilities, including investments in securities held at the date of the financial statements, resulting from changes in the exchange rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and receivables that are denominated in foreign currencies. The payables and receivables are generally related to foreign security transactions and income translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, counterparty risk, political and economic risk, regulatory risk and equity risk. Risks may arise from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividends and Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
2. Derivative Instruments
The Portfolio may invest in various types of derivatives, which may at times result in significant derivative exposure. A derivative is a financial instrument whose performance is derived from the performance of another asset. The Portfolio may invest in derivative instruments including, but not limited to: futures contracts, put options, call options, options on future contracts, options on foreign currencies, options on recovery locks, options on security and commodity indices, swaps, forward contracts, structured investments, and other equity-linked derivatives. Each derivative instrument that was held by the Portfolio during the year ended December 31, 2016 is discussed in further detail below. A summary of derivative activity by the Portfolio is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging purposes (to offset risks associated with an investment, currency exposure, or market conditions), to adjust currency exposure relative to a benchmark index, or for speculative purposes (to earn income and seek to enhance returns). When the Portfolio invests in a derivative for speculative purposes, the Portfolio will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The Portfolio may not use any derivative to gain exposure to an asset or class of assets that it would be prohibited by its investment restrictions from purchasing directly. The Portfolio’s ability to use derivative instruments may also be limited by tax considerations.
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Investments in derivatives in general are subject to market risks that may cause their prices to fluctuate over time. Investments in derivatives may not directly correlate with the price movements of the underlying instrument. As a result, the use of derivatives may expose the Portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The use of derivatives may result in larger losses or smaller gains than otherwise would be the case. Derivatives can be volatile and may involve significant risks.
In pursuit of its investment objective, the Portfolio may seek to use derivatives to increase or decrease exposure to the following market risk factors:
· Commodity Risk – the risk related to the change in value of commodities or commodity-linked investments due to changes in the overall market movements, volatility of the underlying benchmark, changes in interest rates, or other factors affecting a particular industry of commodity such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political, and regulatory developments.
· Counterparty Risk – the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Portfolio.
· Credit Risk – the risk an issuer will be unable to make principal and interest payments when due, or will default on its obligations.
· Currency Risk – the risk that changes in the exchange rate between currencies will adversely affect the value (in U.S. dollar terms) of an investment.
· Equity Risk – the risk related to the change in value of equity securities as they relate to increases or decreases in the general market.
· Index Risk – if the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Portfolio could receive lower interest payments or experience a reduction in the value of the derivative to below what the Portfolio paid. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index.
· Interest Rate Risk – the risk that the value of fixed-income securities will generally decline as prevailing interest rates rise, which may cause the Portfolio’s NAV to likewise decrease.
· Leverage Risk – the risk associated with certain types of leveraged investments or trading strategies pursuant to which relatively small market movements may result in large changes in the value of an investment. The Portfolio creates leverage by investing in instruments, including derivatives, where the investment loss can exceed the original amount invested. Certain investments or trading strategies, such as short sales, that involve leverage can result in losses that greatly exceed the amount originally invested.
· Liquidity Risk – the risk that certain securities may be difficult or impossible to sell at the time that the seller would like or at the price that the seller believes the security is currently worth.
Derivatives may generally be traded OTC or on an exchange. Derivatives traded OTC are agreements that are individually negotiated between parties and can be tailored to meet a purchaser’s needs. OTC derivatives are not guaranteed by a clearing agency and may be subject to increased credit risk.
In an effort to mitigate credit risk associated with derivatives traded OTC, the Portfolio may enter into collateral agreements with certain counterparties whereby, subject to certain minimum exposure requirements, the Portfolio may require the counterparty to post collateral if the Portfolio has a net aggregate unrealized gain on all OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital’s ability to establish and maintain appropriate systems and trading.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is an obligation to buy or sell a specified currency at a future date at a negotiated rate (which may be U.S. dollars or a foreign currency). The Portfolio may enter into forward currency contracts for hedging purposes, including, but not limited to, reducing exposure to changes in foreign currency exchange rates on foreign portfolio holdings and locking in the U.S. dollar cost of firm purchase and sale commitments for securities denominated in or exposed to foreign currencies. The Portfolio may also invest in
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Notes to Financial Statements
forward currency contracts for nonhedging purposes such as seeking to enhance returns. The Portfolio is subject to currency risk and counterparty risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Forward currency contracts are valued by converting the foreign value to U.S. dollars by using the current spot U.S. dollar exchange rate and/or forward rate for that currency. Exchange and forward rates as of the close of the NYSE shall be used to value the forward currency contracts. The unrealized appreciation/(depreciation) for forward currency contracts is reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations for the change in unrealized net appreciation/depreciation (if applicable). The gain or loss arising from the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars upon closing a forward currency contract is reported on the Statement of Operations (if applicable).
During the year, the Portfolio entered into forward currency contracts with the obligation to sell foreign currencies in the future at an agreed upon rate in order to decrease exposure to currency risk associated with foreign currency denominated securities held by the Portfolio.
During the year ended December 31, 2016, the average ending monthly currency value amounts on sold forward currency contracts is $4,605,498. There were no forward currency contracts held at December 31, 2016.
The following table provides information about the effect of derivatives and hedging activities on the Portfolio’s Statement of Operations for the year ended December 31, 2016.
The effect of Derivative Instruments (not accounted for as hedging instruments) on the Statement of Operations for the year ended December 31, 2016 | ||||
Amount of Realized Gain/(Loss) Recognized on Derivatives | ||||
Derivative | Currency |
| ||
Investments and foreign currency transactions | $ 510,766 | (a) | ||
Amount of Change in Unrealized Appreciation/Depreciation Recognized on Derivatives | ||||
Derivative | Currency |
| ||
Investments, foreign currency translations and non-interested Trustees' deferred compensation | $(289,719) | (a) | ||
(a) | Amounts relate to forward currency contracts. | |||
(b) | Amounts relate to purchased options. |
Please see the “Net Realized Gain/(Loss) on Investments” and “Change in Unrealized Net Appreciation/Depreciation” sections of the Portfolio’s Statement of Operations.
3. Other Investments and Strategies
Additional Investment Risk
The Portfolio may be invested in lower-rated debt securities that have a higher risk of default or loss of value since these securities may be sensitive to economic changes, political changes, or adverse developments specific to the issuer.
The financial crisis in both the U.S. and global economies over the past several years has resulted, and may continue to result, in a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks, took steps to support the financial markets. The withdrawal of this support, a failure of measures put in place to respond to the crisis, or investor perception that such efforts were not sufficient could each negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries continue to impact many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. As a result, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment
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objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) provided for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expanded federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act remain pending and will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced, and may continue to experience, severe economic and financial difficulties. In particular, many EU nations are susceptible to economic risks associated with high levels of debt, notably due to investments in sovereign debt of countries such as Greece, Italy, Spain, Portugal, and Ireland. Many non-governmental issuers, and even certain governments, have defaulted on, or been forced to restructure, their debts. Many other issuers have faced difficulties obtaining credit or refinancing existing obligations. Financial institutions have in many cases required government or central bank support, have needed to raise capital, and/or have been impaired in their ability to extend credit. As a result, financial markets in the EU experienced extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world. Greece, Ireland, and Portugal have already received one or more "bailouts" from other Eurozone member states, and it is unclear how much additional funding they will require or if additional Eurozone member states will require bailouts in the future. The risk of investing in securities in the European markets may also be heightened due to the referendum in which the United Kingdom voted to exit the EU (known as “Brexit”). One or more other countries may also abandon the euro and/or withdraw from the EU, placing its currency and banking system in jeopardy.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not. A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk with respect to financial assets and liabilities approximates its carrying value.
The Portfolio may be exposed to counterparty risk through participation in various programs, including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
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Notes to Financial Statements
Inflation-Linked Securities
The Portfolio may invest in inflation-indexed bonds, including municipal inflation-indexed bonds and corporate inflation-indexed bonds, or in derivatives that are linked to these securities. Inflation-linked bonds are fixed-income securities that have a principal value that is periodically adjusted according to the rate of inflation. If an index measuring inflation falls, the principal value of inflation-indexed bonds will typically be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Because of their inflation adjustment feature, inflation-linked bonds typically have lower yields than conventional fixed-rate bonds. In addition, inflation-linked bonds also normally decline in price when real interest rates rise. In the event of deflation, when prices decline over time, the principal and income of inflation-linked bonds would likely decline, resulting in losses to the Portfolio.
In the case of Treasury Inflation-Protected Securities, also known as TIPS, repayment of original bond principal upon maturity (as adjusted for inflation) is guaranteed by the U.S. Treasury. For inflation-linked bonds that do not provide a similar guarantee, the adjusted principal value of the inflation-linked bond repaid at maturity may be less than the original principal. Other non-U.S. sovereign governments also issue inflation-linked securities (sometimes referred to as “linkers”) that are tied to their own local consumer price indices. In certain of these non-U.S. jurisdictions, the repayment of the original bond principal upon the maturity of an inflation-linked bond is not guaranteed, allowing for the amount of the bond repaid at maturity to be less than par. Inflation-linked bonds may also be issued by, or related to, sovereign governments of other developed countries, emerging market countries, or companies or other entities not affiliated with governments.
Loans
The Portfolio may invest in various commercial loans, including bank loans, bridge loans, debtor-in-possession (“DIP”) loans, mezzanine loans, and other fixed and floating rate loans. These loans may be acquired through loan participations and assignments or on a when-issued basis. Commercial loans will comprise no more than 20% of the Portfolio’s total assets. Below are descriptions of the types of loans held by the Portfolio as of December 31, 2016.
· Bank Loans - Bank loans are obligations of companies or other entities entered into in connection with recapitalizations, acquisitions, and refinancings. The Portfolio’s investments in bank loans are generally acquired as a participation interest in, or assignment of, loans originated by a lender or other financial institution. These investments may include institutionally-traded floating and fixed-rate debt securities.
· Floating Rate Loans – Floating rate loans are debt securities that have floating interest rates, that adjust periodically, and are tied to a benchmark lending rate, such as London Interbank Offered Rate (“LIBOR”). In other cases, the lending rate could be tied to the prime rate offered by one or more major U.S. banks or the rate paid on large certificates of deposit traded in the secondary markets. If the benchmark lending rate changes, the rate payable to lenders under the loan will change at the next scheduled adjustment date specified in the loan agreement. Floating rate loans are typically issued to companies (‘‘borrowers’’) in connection with recapitalizations, acquisitions, and refinancings. Floating rate loan investments are generally below investment grade. Senior floating rate loans are secured by specific collateral of a borrower and are senior in the borrower’s capital structure. The senior position in the borrower’s capital structure generally gives holders of senior loans a claim on certain of the borrower’s assets that is senior to subordinated debt and preferred and common stock in the case of a borrower’s default. Floating rate loan investments may involve foreign borrowers, and investments may be denominated in foreign currencies. Floating rate loans often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged. The Portfolio may invest in obligations of borrowers who are in bankruptcy proceedings. While the Portfolio generally expects to invest in fully funded term loans, certain of the loans in which the Portfolio may invest include revolving loans, bridge loans, and delayed draw term loans.
Purchasers of floating rate loans may pay and/or receive certain fees. The Portfolio may receive fees such as covenant waiver fees or prepayment penalty fees. The Portfolio may pay fees such as facility fees. Such fees may affect the Portfolio’s return.
· Mezzanine Loans - Mezzanine loans are secured by the stock of the company that owns the assets. Mezzanine loans are a hybrid of debt and equity financing that is typically used to fund the expansion of existing companies. A mezzanine loan is composed of debt capital that gives the lender the right to convert to
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an ownership or equity interest in the company if the loan is not paid back in time and in full. Mezzanine loans typically are the most subordinated debt obligation in an issuer’s capital structure.
Mortgage- and Asset-Backed Securities
Mortgage- and asset-backed securities represent interests in “pools” of commercial or residential mortgages or other assets, including consumer loans or receivables. The Portfolio may purchase fixed or variable rate commercial or residential mortgage-backed securities issued by the Government National Mortgage Association (“Ginnie Mae”), the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or other governmental or government-related entities. Ginnie Mae’s guarantees are backed by the full faith and credit of the U.S. Government, which means that the U.S. Government guarantees that the interest and principal will be paid when due. Fannie Mae and Freddie Mac securities are not backed by the full faith and credit of the U.S. Government. In September 2008, the Federal Housing Finance Agency (“FHFA”), an agency of the U.S. Government, placed Fannie Mae and Freddie Mac under conservatorship. Since that time, Fannie Mae and Freddie Mac have received capital support through U.S. Treasury preferred stock purchases, and Treasury and Federal Reserve purchases of their mortgage-backed securities. The FHFA and the U.S. Treasury have imposed strict limits on the size of these entities’ mortgage portfolios. The FHFA has the power to cancel any contract entered into by Fannie Mae and Freddie Mac prior to FHFA’s appointment as conservator or receiver, including the guarantee obligations of Fannie Mae and Freddie Mac.
The Portfolio may also purchase other mortgage- and asset-backed securities through single- and multi-seller conduits, collateralized debt obligations, structured investment vehicles, and other similar securities. Asset-backed securities may be backed by various consumer obligations, including automobile loans, equipment leases, credit card receivables, or other collateral. In the event the underlying loans are not paid, the securities’ issuer could be forced to sell the assets and recognize losses on such assets, which could impact your return. Unlike traditional debt instruments, payments on these securities include both interest and a partial payment of principal. Mortgage and asset-backed securities are subject to both extension risk, where borrowers pay off their debt obligations more slowly in times of rising interest rates, and prepayment risk, where borrowers pay off their debt obligations sooner than expected in times of declining interest rates. These risks may reduce the Portfolio’s returns. In addition, investments in mortgage- and asset backed securities, including those comprised of subprime mortgages, may be subject to a higher degree of credit risk, valuation risk, and liquidity risk than various other types of fixed-income securities. Additionally, although mortgage-backed securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that guarantors or insurers will meet their obligations.
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, corporate bonds, preferred stocks, and other equity securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
Restricted Security Transactions
Restricted securities held by the Portfolio may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933, as amended. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of the Portfolio to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist.
Sovereign Debt
The Portfolio may invest in U.S. and foreign government debt securities (“sovereign debt”). Investments in U.S. sovereign debt are considered low risk. However, investments in non-U.S. sovereign debt can involve a high degree of risk, including the risk that the governmental entity that controls the repayment of sovereign debt may not be willing or able to repay the principal and/or to pay the interest on its sovereign debt in a timely manner. A sovereign debtor’s willingness or ability to satisfy its debt obligation may be affected by various factors, including its cash flow situation, the extent of its foreign currency reserves, the availability of foreign exchange when a payment is due, the relative size of its debt position in relation to its economy as a whole, the sovereign debtor’s policy toward international lenders, and local political constraints to which the governmental entity may be subject. Sovereign debtors may also be dependent on
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expected disbursements from foreign governments, multilateral agencies, and other entities. The failure of a sovereign debtor to implement economic reforms, achieve specified levels of economic performance, or repay principal or interest when due may result in the cancellation of third party commitments to lend funds to the sovereign debtor, which may further impair such debtor’s ability or willingness to timely service its debts. The Portfolio may be requested to participate in the rescheduling of such sovereign debt and to extend further loans to governmental entities, which may adversely affect the Portfolio’s holdings. In the event of default, there may be limited or no legal remedies for collecting sovereign debt and there may be no bankruptcy proceedings through which the Portfolio may collect all or part of the sovereign debt that a governmental entity has not repaid.
When-Issued and Delayed Delivery Securities
The Portfolio may purchase or sell securities on a when-issued or delayed delivery basis. When-issued and delayed delivery securities in which the Portfolio may invest include U.S. Treasury Securities, municipal bonds, bank loans, and other similar instruments. The price of the underlying securities and date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Losses may arise due to changes in the market value of the securities or from the inability of counterparties to meet the terms of the contract. In connection with such purchases, the Portfolio may hold liquid assets as collateral with the Portfolio’s custodian sufficient to cover the purchase price.
4. Investment Advisory Agreements and Other Transactions with Affiliates
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The Portfolio’s contractual investment advisory fee rate (expressed as an annual rate) is 0.55% of its average daily net assets.
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. Effective May 1, 2016, Janus Services receives an administrative services fee at an annual rate of 0.05% of the average daily net assets of the Portfolio for arranging for the provision by participating insurance companies and qualified plan service providers of administrative services, including recordkeeping, subaccounting, order processing, or other shareholder services provided on behalf of contract holders or plan participants investing in the Portfolio. Other shareholder services may include the provision of order confirmations, periodic account statements, forwarding prospectuses, shareholder reports, and other materials to existing investors, and answering inquiries regarding accounts. Janus Services expects to use this entire fee to compensate insurance companies and qualified plan service providers for providing these services to their customers who invest in the Portfolio. Any unused portion will be reimbursed to the applicable share class at least annually.
In addition, Janus Services provides or arranges for the provision of certain other internal administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for these internal services related to the shares, except for out-of-pocket costs. These amounts are disclosed as “Other transfer agent fees and expenses” on the Statement of Operations.
Under a distribution and shareholder servicing plan (the “Plan”) adopted in accordance with Rule 12b-1 under the 1940 Act, the Service Shares may pay the Trust’s distributor, Janus Distributors LLC (“Janus Distributors”), a wholly-owned subsidiary of Janus Capital, a fee for the sale and distribution and/or shareholder servicing of the Service Shares at an annual rate of up to 0.25% of the average daily net assets of the Service Shares. Under the terms of the Plan, the Trust is authorized to make payments to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder services performed by such entities. These amounts are disclosed as “12b-1 Distribution and shareholder servicing fees” on the Statement of Operations. Payments under the Plan are not tied exclusively to actual 12b-1 distribution and servicing fees, and the payments may exceed 12b-1 distribution and servicing fees actually incurred. If any of the Portfolio’s actual 12b-1 distribution and servicing fees incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “12b-1 Distribution fees and shareholder servicing fees” in the Statement of Operations.
Janus Capital furnishes certain administration, compliance, and accounting services for the Portfolio and is reimbursed by the Portfolio for certain of its costs in providing those services (to the extent Janus Capital seeks reimbursement and such costs are not otherwise waived). In addition, employees of Janus Capital and/or its affiliates may serve as officers of the Trust. The Portfolio also pays for some or all of the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. The Portfolio pays these costs based on out-of-pocket expenses incurred by Janus Capital, and these costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services
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Notes to Financial Statements
Janus Capital provides to the Portfolio. These amounts are disclosed as “Portfolio administration fees” on the Statement of Operations. Some expenses related to compensation payable to the Portfolio's Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $56,245 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2016. The Portfolio's portion is reported as part of “Other expenses” on the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is included as of December 31, 2016 on the Statement of Assets and Liabilities in the asset, “Non-interested Trustees’ deferred compensation,” and liability, “Non-interested Trustees’ deferred compensation fees.” Additionally, the recorded unrealized appreciation/(depreciation) is included in “Unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation” on the Statement of Assets and Liabilities. Deferred compensation expenses for the year ended December 31, 2016 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $201,900 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2016.
Pursuant to the provisions of the 1940 Act and related rules, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Funds”). As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated money market funds or cash management pooled investment vehicles and the Investing Funds. Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered product compliant with Rule 2a-7 under the 1940 Act. There are no restrictions on the Portfolio's ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. The units of Janus Cash Liquidity Fund LLC are not charged any management fee, sales charge or service fee.
Any purchases and sales, realized gains/losses and recorded dividends from affiliated investments during the year ended December 31, 2016 can be found in a table located in the Notes to Schedule of Investments and Other Information.
The Portfolio is permitted to purchase or sell securities (“cross-trade”) between itself and other funds or accounts managed by Janus Capital Management LLC in accordance with Rule 17a-7 under the Investment Company Act of 1940 (“Rule 17a-7”), when the transaction is consistent with the investment objectives and policies of the Portfolio and in accordance with the Internal Cross Trade Procedures adopted by the Trust’s Board of Trustees. These procedures have been designed to ensure that any cross-trade of securities by the Portfolio from or to another fund or account that is or could be considered an affiliate of the Portfolio under certain limited circumstances by virtue of having a common investment adviser, common Officer, or common Trustee complies with Rule 17a-7. Under these procedures, each cross-trade is effected at the current market price to save costs where allowed. During the year ended December 31, 2016, the Portfolio engaged in cross trades amounting to $185,572,220 in purchases and $41,480,984 in sales, resulting in a net realized loss of $647,342. The net realized loss is included within the “Net Realized Gain/(Loss) on Investments” section of the Portfolio’s Statement of Operations.
5. Federal Income Tax
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
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Notes to Financial Statements
Other book to tax differences primarily consist of deferred compensation, derivatives, and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses, if applicable. Other foreign currency gains and losses on debt instruments are treated as ordinary income for federal income tax purposes pursuant to Section 988 of the Internal Revenue Code.
Loss Deferrals | Other Book | Net Tax | |||||
Undistributed | Undistributed | Accumulated | Late-Year | Post-October | to Tax | Appreciation/ | |
$ 12,320,609 | $ 4,078,139 | $ - | $ - | $ - | $ (44,717) | $281,566,963 |
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2016 are noted below.
Unrealized appreciation and unrealized depreciation in the table below exclude appreciation/depreciation on foreign currency translations. The primary differences between book and tax appreciation or depreciation of investments are wash sale loss deferrals and investments in partnerships.
Federal Tax Cost | Unrealized | Unrealized | Net Tax Appreciation/ |
$ 2,350,458,129 | $311,489,328 | $(29,922,365) | $ 281,566,963 |
Income and capital gains distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferral of wash sale losses, foreign currency transactions, net investment losses, and capital loss carryovers. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to capital.
For the year ended December 31, 2016 | ||||
Distributions | ||||
From Ordinary Income | From Long-Term Capital Gains | Tax Return of Capital | Net Investment Loss | |
$ 48,682,033 | $ 32,862,627 | $ - | $ - |
For the year ended December 31, 2015 | ||||
Distributions | ||||
From Ordinary Income | From Long-Term Capital Gains | Tax Return of Capital | Net Investment Loss | |
$ 37,052,217 | $ 64,669,597 | $ - | $ - |
Permanent book to tax basis differences may result in reclassifications between the components of net assets. These differences have no impact on the results of operations or net assets. The following reclassifications have been made to the Portfolio:
Increase/(Decrease) to Capital | Increase/(Decrease) to Undistributed | Increase/(Decrease) to Undistributed | |
$ - | $ (195,774) | $ 195,774 |
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Notes to Financial Statements
6. Capital Share Transactions
Year ended December 31, 2016 | Year ended December 31, 2015 | |||||
Shares | Amount | Shares | Amount | |||
Institutional Shares: | ||||||
Shares sold | 1,189,959 | $ 34,459,931 | 1,101,594 | $ 34,376,815 | ||
Reinvested dividends and distributions | 513,363 | 15,096,889 | 760,784 | 23,355,236 | ||
Shares repurchased | (3,158,269) | (92,030,809) | (2,228,010) | (68,749,424) | ||
Net Increase/(Decrease) | (1,454,947) | $ (42,473,989) |
| (365,632) | $ (11,017,373) | |
Service Shares: | ||||||
Shares sold | 15,605,883 | $491,558,526 | 22,759,501 | $746,923,739 | ||
Reinvested dividends and distributions | 2,145,917 | 66,447,771 | 2,428,045 | 78,366,578 | ||
Shares repurchased | (5,844,123) | (181,668,181) | (4,476,788) | (145,175,742) | ||
Net Increase/(Decrease) | 11,907,677 | $376,338,116 |
| 20,710,758 | $680,114,575 |
7. Purchases and Sales of Investment Securities
For the year ended December 31, 2016, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of | Proceeds from Sales | Purchases of Long- | Proceeds from Sales |
$1,470,225,909 | $1,095,177,517 | $ 619,245,826 | $ 749,921,086 |
8. Merger Related Matters
On October 3, 2016, Janus Capital Group Inc. (“JCGI”), the direct parent of Janus Capital Management LLC, the investment adviser to the Portfolio (“Janus Capital”), and Henderson Group plc (“Henderson”) announced that they had entered into an Agreement and Plan of Merger (“Merger Agreement”) relating to the strategic combination of Henderson and JCGI (the “Transaction”). Pursuant to the Merger Agreement, a newly formed, direct wholly-owned subsidiary of Henderson will merge with and into JCGI, with JCGI as the surviving corporation and a direct wholly-owned subsidiary of Henderson. The Transaction is currently expected to close in the second quarter of 2017, subject to requisite shareholder and regulatory approvals.
The consummation of the Transaction may be deemed to be an “assignment” (as defined in the Investment Company Act of 1940, as amended) of the current advisory agreement between Janus Capital and the Portfolio. In addition, the consummation of the Transaction may be deemed to be an assignment of the current sub-advisory agreements between Janus Capital and each of INTECH Investment Management LLC (“INTECH”) and Perkins Investment Management LLC (“Perkins”), the subadvisers to certain portfolios. As a result, the consummation of the Transaction may cause such investment advisory agreements and investment sub-advisory agreements to terminate automatically in accordance with their respective terms.
On December 8, 2016, the Board of Trustees of the Portfolio (the “Board of Trustees”) approved, subject to approval of shareholders, a new investment advisory agreement between the Portfolio and Janus Capital in order to permit Janus Capital to continue to provide advisory services to the Portfolio following the closing of the Transaction. The new investment advisory agreement will have substantially similar terms as the corresponding current investment advisory agreement.
On December 8, 2016, the Board of Trustees also approved interim investment advisory agreements between the Portfolio and Janus Capital and interim sub-advisory agreements between Janus Capital and the Portfolio’s subadviser, as applicable. In the event shareholders of the Portfolio do not approve the new investment advisory agreement (and, if applicable, the new investment sub-advisory agreement) prior to the closing of the Transaction, an interim investment advisory agreement (and, if applicable, an interim investment sub-advisory agreement) will take effect with respect to the Portfolio upon the closing of the Transaction. Such interim agreements will continue in effect for a term ending on the earlier of 150 days from the closing of the Transaction, or when shareholders of the Portfolio approve the new investment advisory agreement and new investment sub-advisory agreement, if applicable. Compensation earned by
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Notes to Financial Statements
Janus Capital and the Portfolio’s subadviser, if applicable, under their respective interim investment advisory agreement or interim investment sub-advisory agreement will be held in an interest-bearing escrow account and will be paid to Janus Capital or the subadviser, as applicable, if shareholders approve the corresponding new investment advisory agreement or new investment sub-advisory agreement prior to the end of the interim period. Except for the term and escrow provisions described above, the terms of each interim investment advisory agreement and interim investment subadvisory agreement are substantially similar to those of the corresponding current investment advisory agreement or current investment sub-advisory agreement.
In addition, the Portfolio’s name will change to reflect “Janus Henderson” as part of the Portfolio’s name.
Shareholders and contract owners of record of the Portfolio as of December 29, 2016, will receive a proxy statement, notice of special meeting of shareholders, and proxy card, containing detailed information regarding shareholder proposals with respect to these and certain other matters. The shareholder meeting is expected to be held on or about April 6, 2017.
9. Subsequent Event
Management has evaluated whether any events or transactions occurred subsequent to December 31, 2016 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Janus Aspen Series and Shareholders of Janus Aspen Balanced Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Balanced Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and transfer agent, provide a reasonable basis for our opinion.
Denver, Colorado
February 10, 2017
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Additional Information (unaudited)
Proxy Voting Policies and Voting Record
A description of the policies and procedures that the Portfolio uses to determine how to vote proxies relating to its portfolio securities is available without charge: (i) upon request, by calling 1-800-525-0020 (toll free); (ii) on the Portfolio’s website at janus.com/proxyvoting; and (iii) on the SEC’s website at http://www.sec.gov. Additionally, information regarding the Portfolio’s proxy voting record for the most recent twelve-month period ended June 30 is also available, free of charge, through janus.com/proxyvoting and from the SEC’s website at http://www.sec.gov.
Quarterly Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of investments) with the SEC for the first and third quarters of each fiscal year on Form N-Q within 60 days of the end of such fiscal quarter. The Portfolio’s Form N-Q: (i) is available on the SEC’s website at http://www.sec.gov; (ii) may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (information on the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iii) is available without charge, upon request, by calling Janus at 1-800-525-0020 (toll free).
APPROVAL OF ADVISORY AND SUB-ADVISORY AGREEMENTS WITH JANUS CAPITAL AND JANUS CAPITAL AFFILIATES DURING THE PERIOD
On September 15, 2016, Janus Capital Group Inc. (“Janus”) advised the Trustees of Janus Investment Fund (the “Trust”), each of whom serves as an “independent” Trustee (the “Board” or the “Trustees”) of its intent to seek a strategic combination of its advisory business with Henderson Group plc (“Henderson”). The Board met with the Chief Executive Officer of Janus, who outlined the proposed combination and the potential benefits to Janus Capital Management LLC (“Janus Capital”) and each Fund of the Trust (each, a “Fund” and collectively, the “Funds”). Subsequent to the September 15, 2016 meeting, the Trustees identified a list of basic principles, which they believed should serve as the foundation for their review of the organizational, operational and strategic issues involved with any potential change in control of Janus Capital, the investment adviser to the Funds. These basic principles were communicated to Janus Capital on September 27, 2016, and were intended to be shared with Henderson. On October 3, 2016, Janus announced that it had entered into a definitive Agreement and Plan of Merger with Henderson pursuant to which Janus and Henderson agreed to effect an all-stock merger of equals strategic combination of their respective businesses, with Janus Capital surviving the merger as a direct wholly-owned subsidiary of Henderson (the “Transaction”). The Board was advised that, subject to certain conditions, the Transaction is currently expected to close during the second quarter of 2017.
As part of its due diligence, the Board developed an initial list of questions related to the proposed transaction, which was provided to Janus Capital on October 6, 2016. At a special Board meeting held on October 19, 2016, the Board considered Janus Capital’s response to the initial information request and met with the management of Janus to discuss the impact of the Transaction on the nature, extent and quality of services Janus Capital is expected to provide to the Janus Funds following the Transaction, addressing, among other matters, the personnel expected to provide such services, and the resources available to do so. After its October 19, 2016 meeting, the Board developed a supplemental request for additional information, which was provided to Janus Capital on October 26, 2016. At another special Board meeting held on November 7-8, 2016, the Board considered Janus Capital’s response to the supplemental information request and again met with the management of Janus and Henderson to discuss the impact of the Transaction on the nature, extent and quality of services Janus Capital is expected to provide to the Janus Funds following the Transaction, and also met with various officers of the Funds and of Janus Capital including various Fund portfolio managers. After its November 7-8, 2016 meeting, the Board developed a second supplemental request for additional information, which was provided to Janus Capital on November 21, 2016. On December 7-8, 2016, the Board met to consider Janus Capital’s response to the second supplemental information request and to also consider the proposed new investment advisory agreements between the Trust, on behalf of each Fund, and Janus Capital (each, a “New Advisory Agreement” and collectively, the “New Advisory Agreements”) and the new sub-advisory agreements between Janus Capital and each of the Funds that utilize INTECH Investment Management LLC (“INTECH”) or Perkins Investment Management LLC (“Perkins”) as sub-advisers (each, a “New Sub-Advisory Agreement” and collectively, the “New Sub-Advisory Agreements”) to take effect immediately after the Transaction or shareholder approval, whichever is later. During each of these meetings, the Board sought additional and clarifying information as it deemed necessary or appropriate. Throughout the process, the Board had the assistance of its independent legal counsel, who advised them on, among other things, its duties and obligations.
In connection with the Board’s review, Janus Capital provided, and the Board obtained, substantial information regarding the following matters: the management, financial position and business of Henderson; the history of Henderson’s
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Additional Information (unaudited)
business and operations; the investment performance of the investment companies advised by Henderson; the proposed structure, operations and investment processes of the combined investment management organization after the Transaction and the strategy for operating and growing the business following the Transaction; the future plans of Janus and Henderson with respect to the Funds and any proposed changes to the operations or structure of the Funds; and the future plans of Janus and Henderson with respect to the provision of services to the Funds, and the entities providing such services, including those affiliated with Janus. The Board also received information regarding the terms of the Transaction, anticipated management of the combined organization, the resources that each of Janus and Henderson bring to the combined organization and the process being followed by Janus and Henderson to integrate their organizations. The Board also received information regarding the impact of the Transaction on each of INTECH and Perkins.
In connection with the Board’s approval of New Advisory Agreements and New Sub-Advisory Agreements at its December 8, 2016 meeting, the Board also continued its on-going annual process to determine whether to continue the existing investment advisory agreements between Janus Capital and the Trust on behalf of each Fund (each, a “Current Advisory Agreement” and collectively, the “Current Advisory Agreements”) and the existing sub-advisory agreements between Janus Capital and each of the Funds that utilize INTECH or Perkins as sub-advisers (each, a “Current Sub-Advisory Agreement” and collectively, the “Current Sub-Advisory Agreements”). In this regard, the Board received and reviewed information provided by Janus and the respective Sub-Advisers in response to requests of the Board and its independent legal counsel. The Board also received and reviewed information and analysis provided by, and in response to requests of, its independent fee consultant. The Board noted that as part of this annual process, the Board had considered and was in the process of considering, numerous factors, including the nature and quality of services provided by Janus Capital and each Sub-Adviser, as applicable; investment performance, on an absolute basis and relative to appropriate peer groups and one or a combination of market indices; investment management fees, expense ratios and asset sizes of the Funds and peer groups; investment management fees charged to comparable investment companies, separate accounts and non-fund clients; Janus Capital’s profitability from managing the Funds; fall-out benefits to Janus Capital from its relationship to the Funds, including revenues derived from services provided to the Funds by affiliates of Janus Capital; and the potential benefits to Janus Capital, the Funds of receiving research services from broker/dealer firms in connection with the allocation of portfolio transactions to such firms.
In determining whether to approve the New Advisory Agreement for each Fund and the New Sub-Advisory Agreement for Funds managed by INTECH or Perkins in connection with the Transaction, and whether to recommend approval to Fund shareholders, the Board received information and made inquiries into all matters as it deemed appropriate. The Board reviewed and analyzed various factors it deemed relevant, including the following factors, among others, none of which by itself was considered dispositive:
· The terms of the New Advisory Agreements are substantially similar to the corresponding Current Advisory Agreements, and the contractual fee rate will not change. In this regard, see the discussion of the Board’s considerations with respect to its most recent approval of the Current Advisory Agreements prior to December 8, 2016, as disclosed in each Fund’s most recent prior annual or semi-annual shareholder report, as applicable.
· The terms of the New Sub-Advisory Agreements are substantially similar to the corresponding Current Sub-Advisory Agreements, and the contractual fee rate will not change. In this regard, see the discussion of the Board’s considerations with respect to its most recent approval of the Current Sub-Advisory Agreements prior to December 8, 2016, as disclosed in each Fund’s most recent prior annual or semi-annual shareholder report, as applicable.
· Janus Capital’s plans for the operation of the Funds, including its plans for the continued provision of all services currently provided to the Funds by Janus Capital and its affiliates, including, among others, investment advisory services, portfolio trading services, and Fund administrative and accounting services, and the personnel and resources proposed to support the provision of such services.
· The estimated profitability to Janus Capital from managing the Funds after the Transaction, including potential economies of scale and fall-out benefits to Janus Capital from its relationship to the Funds, including revenues derived from services provided to the Funds by affiliates of Janus Capital, and the potential benefits to Janus Capital, and the Funds of receiving research services from broker/dealer firms in connection with the allocation of portfolio transactions to such firms.
In connection with its deliberations, the Board received assurances from Janus, on behalf of itself and its affiliates (collectively, “Janus”) including the following:
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Additional Information (unaudited)
· Janus has provided to the Board such information as it believes is reasonably necessary to evaluate the New Advisory Agreements and New Sub-Advisory Agreements.
· Janus is committed to the continuance, without interruption, of services to the Funds of at least the type and quality currently provided by Janus Capital and its affiliates, or superior thereto.
· The Transaction is not expected to affect negatively the nature, extent or quality of the investment advisory services provided by Janus Capital to the Funds following the Transaction, and the investment advisory services are expected to be at least comparable to the services being provided under the Current Advisory Agreements and Current Sub-Advisory Agreements. In this regard, the Board noted specific representations that Janus does not intend for the nature, extent or quality of investment advisory and other services to be provided to the Funds following the Transaction to change, and the extent of such services were expected to increase based on the combined resources of the combined investment management organization after the Transaction, and should the nature, extent or quality of such services decline, Janus would commit the resources needed to return such services to pre-Transaction levels.
· The Funds’ current operations were expected to remain largely unchanged, except for certain fund reorganizations which will be separately considered by the Board, and such other changes as were or will be presented to the Board.
· The Transaction is not expected to result in any changes to the portfolio managers providing services to the Funds.
· After the Transaction, the distribution and marketing services provided to the Janus Funds were expected to be improved or enhanced based on the combined resources of Janus and Henderson. In this regard, Janus Capital advised the Board that after the Transaction, the extent of distribution and marketing services provided to the Janus Funds are expected to increase based on the combined resources of Janus and Henderson. This is due primarily to the anticipated increase of sales related resources and expanded global presence of the combined Janus Henderson organization, which is expected to enhance visibility and brand recognition of the Janus Henderson Funds.
· The intent of Janus Capital to take the necessary and appropriate steps to retain and attract key investment advisory personnel.
· The intent of Janus to take the necessary and appropriate steps to retain and attract key compliance, financial, fund accounting and administrative personnel supporting the management and oversight of the Funds.
· Janus is not aware of any express or implied term, condition, arrangement or understanding that would impose in its best judgement an “unfair burden” on any Fund as a result of the Transaction, as defined in Section 15(f) of the 1940 Act, and that Janus will take no action that would have the effect of imposing such an “unfair burden” on any Fund in connection with the Transaction.
Janus assured the Board that it intended to comply with Section 15(f) of the Investment Company Act of 1940, as amended. Section 15(f) provides a non-exclusive safe harbor for an investment adviser to an investment company or any of its affiliated persons to receive any amount or benefit in connection with a change in control of the investment adviser so long as two conditions are met. First, for a period of three years after the transaction, at least 75% of the board members of the investment company must not be interested persons of such investment adviser (as defined under the 1940 Act). The composition of the Board is in compliance with this provision of Section 15(f). In addition, after careful review and consideration, the Board determined that it would be in the best interests of the Funds to add to the Board an individual who currently acts as a non-interested board member of the Henderson Trust. The Board believes that this change in the Board composition will provide perspective and insight relating to experience working with the Henderson organization. The Board’s Nominating and Governance Committee considered a number of candidates and recommended that the Board nominate one proposed new trustee from those candidates who currently act as non-interested board members of the Henderson Trust. The Board approved that trustee nominee to serve on the Board, subject to election by the shareholders of the Funds and contingent on the closing of the Transaction. If the new trustee is elected and serves on the Board, the Board composition would continue to satisfy the provisions of Section 15(f).
To meet the second condition of Section 15(f), an “unfair burden” must not be imposed upon the investment company as a result of such transaction or any express or implied terms, conditions or understandings applicable thereto. The
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Additional Information (unaudited)
term “unfair burden” is defined in Section 15(f) to include any arrangement during the two-year period after the transaction, whereby the investment adviser, or any interested person of such adviser, receives or is entitled to receive any compensation, directly or indirectly, from the investment company or its shareholders (other than fees for bona fide investment advisory or other services) or from any person in connection with the purchase or sale of securities or other property to, from or on behalf of the investment company (other than bona fide ordinary compensation as principal underwriter for such investment company).
Janus represented that it does not believe that an “unfair burden” will be placed on the Funds as a result of the Transaction. In furtherance thereof, Janus has undertaken to pay the costs of preparing and distributing proxy materials to, and of holding the meetings of, the Funds’ shareholders (the “Meetings”), as well as other fees and expenses in connection with the Transaction, including the reasonable fees and expenses of legal counsel and consultants to the Funds and the Trustees. In addition, Janus has agreed, for a period of two years following the closing of the Transaction, (i) not to request any increases to advisory fees for the Funds, other than those proposed to and approved by the Board prior to the close of the Transaction, and (ii) to continue to use the current process by which expense caps are set annually for the Funds.
As a result of its review and consideration of the New Investment Advisory Agreements and New Sub-Advisory Agreements in connection with the Transaction, at a meeting on December 8, 2016, the Board voted unanimously to approve a New Investment Advisory Agreement for each Fund and a New Sub-Advisory Agreement for each Fund managed by INTECH or Perkins, and to recommend such agreements to the Funds’ shareholders for their approval.
Approval of Interim Advisory and Sub-Advisory Agreements with Janus Capital and Janus Capital Affiliates during the Period
In the event shareholders of a Fund do not approve such Fund’s New Advisory Agreement and/or New Sub-Advisory Agreement at the Meetings prior to the closing of the Transaction, Janus Capital proposed that an interim investment advisory agreement between Janus Capital and such Fund (each, an “Interim Advisory Agreement” and collectively, the “Interim Advisory Agreements”) and an interim sub-advisory agreement between Janus Capital and the applicable Sub-Adviser (each, an “Interim Sub-Advisory Agreement” and collectively, the “Interim Sub-Advisory Agreements”) take effect upon the closing of the Transaction. At the December 8, 2016 meeting, the Board, all of whom are Independent Trustees, unanimously approved an Interim Advisory Agreement for each Fund and an Interim Sub-Advisory Agreement for each applicable Fund in order to assure continuity of investment advisory services to the Funds and sub-advisory services to the sub-advised Funds after the Transaction. The terms of each Interim Advisory Agreement are substantially identical to those of the applicable Current Advisory Agreement and New Advisory Agreement, except for the term and escrow provisions described below. Similarly, the terms of each Interim Sub-Advisory Agreement are substantially identical to those of the Current Sub-Advisory Agreements and New Sub-Advisory Agreements, except for the term and escrow provisions described below. The Interim Advisory Agreement and Interim Sub-Advisory Agreement will continue in effect for a term ending on the earlier of 150 days from the closing of the Transaction (the “150-day period”) or when shareholders of the Fund approve the New Advisory Agreement and/or New Sub-Advisory Agreement. Pursuant to Rule 15a-4 under the 1940 Act, compensation earned by Janus Capital under an Interim Advisory Agreement and compensation earned by a Sub-Adviser under an Interim Sub-Advisory Agreement will be held in an interest-bearing escrow account. If shareholders of a Fund approve the New Advisory Agreement prior to the end of the 150-day period, the amount held in the escrow account under the Interim Advisory Agreement will be paid to Janus Capital. If shareholders of a Fund approve the New Advisory Agreement and New Sub-Advisory Agreement prior to the end of the 150-day period, the amount held in the escrow account under the Interim Sub-Advisory Agreement will be paid to the Sub-Adviser. If shareholders of a Fund do not approve the New Advisory Agreement prior to the end of the 150-day period, the Board will take such action as it deems to be in the best interests of the Fund, and Janus Capital will be paid the lesser of its costs incurred in performing its services under the Interim Advisory Agreement or the total amount in the escrow account, plus interest earned. If shareholders of a Fund do not approve the New Advisory Agreement and/or New Sub-Advisory Agreement prior to the end of the 150-day period, the Board will take such action as it deems to be in the best interests of the Fund, and the Sub-Adviser will be paid the lesser of its costs incurred in performing its services under the Interim Sub-Advisory Agreement or the total amount in the escrow account, plus interest earned.
Approval of an Amended and Restated Investment Advisory Agreement for Janus Portfolio
Janus Capital met with the Trustees on December 7-8, 2016, to discuss the approval of an amended and restated investment advisory agreement (the “Amended Advisory Agreement”) between Janus Capital and the Trust on behalf of
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Additional Information (unaudited)
Janus Portfolio (for the purposes of this section, the “Fund” refers to Janus Portfolio) and other matters related to the proposed changes to the Fund’s name, principal investment strategies, and portfolio management team (the “Realignment”). At the meeting, the Trustees also discussed the Amended Advisory Agreement and other matters related to the Realignment with their independent counsel in executive session. During the course of this meeting, the Trustees requested and considered such information as they deemed relevant to their deliberations. In addition, at prior meetings and during the course of this meeting the Board also considered the proposal to merge the Janus Fund, a series of Janus Investment Fund, into the Janus Research Fund, another series of Janus Investment Fund, and undertook a comprehensive process to evaluate the impact of the Transaction on the nature, quality and extent of services expected to be provided by Janus Capital to the Fund, including after the completion of the Transaction. For a fuller discussion of the Board’s consideration of the approval of a new investment advisory agreement for the Fund in connection with the Transaction, see “Approval of Advisory and Sub-Advisory Agreements with Janus and Janus Affiliates during the Period” above.
At a meeting of the Board of Trustees held on December 8, 2016, the Trustees approved the Amended Advisory Agreement and other matters related to the Realignment. In determining whether to approve the Amended Advisory Agreement, and whether to recommend approval to Fund shareholders, the Board received information and made inquiries into all matters as it deemed appropriate. The Board reviewed and analyzed various factors it deemed relevant, including the following factors, among others, none of which by itself was considered dispositive:
· the terms of the Amended Advisory Agreement are substantially the same as the Current Advisory Agreement, except for the change to the advisory fee rate based on the amount of such outperformance or underperformance (the “Full Performance Rate”) and cumulative investment record of the Fund’s benchmark index (the “Performance Fee Benchmark”);
· the estimated impact of the change to the Full Performance Rate and Performance Fee Benchmark on the amount of advisory fees to be paid by the Fund, including consideration of comparative pro forma data showing the advisory fees payable if the Amended Advisory Agreement had been in place in prior years;
· the Fund’s investment team will be able to more efficiently manage the Fund’s portfolio, assuming the merger of the Janus Fund into Janus Research Fund is implemented, which may also provide benefits from opportunities to aggregate trading across funds that have similar investment strategies;
· Janus Capital’s belief that the Fund shareholders may benefit from the Realignment, as a result of the research-driven investment process to be implemented, which includes lower historical transaction costs and potential performance gains from securities lending as compared to the Fund’s current investment approach;
· the Realignment was being proposed as part of Janus Capital’s efforts to streamline its product line;
· Janus Capital’s belief that the Fund would benefit from Janus Capital’s operational efficiencies resulting from the merger of the Janus Fund into the Janus Research Fund and the Realignment, including a potentially more efficient and effective investment management approach providing the potential for a growing fund and improved performance after the Realignment;
· the costs of seeking approval of the Amended Advisory Agreement will be borne by Janus Capital;
· the costs incurred to reposition the Fund’s portfolio in connection with the Realignment;
· the potential tax consequences of any repositioning of the Fund’s portfolio as a result of the Merger; and any potential benefits of Janus Capital and its affiliates as a result of the Realignment.
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Useful Information About Your Portfolio Report (unaudited)
The Management Commentary in this report includes valuable insight as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. A company may be allocated to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed in the Management Commentary are just that: opinions. They are a reflection based on best judgment at the time this report was compiled, which was December 31, 2016. As the investing environment changes, so could opinions. These views are unique and are not necessarily shared by fellow employees or by Janus in general.
Performance Overviews
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. When comparing the performance of the Portfolio with an index, keep in mind that market indices are not available for investment and do not reflect deduction of expenses.
Average annual total returns are quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
Schedule of Investments
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options, swaptions, and swaps follow the Portfolio’s Schedule of Investments (if applicable).
Statement of Assets and Liabilities
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
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Useful Information About Your Portfolio Report (unaudited)
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned, and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid, and expenses owed but not yet paid. Additionally, there may be other assets and liabilities such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
Statement of Operations
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
Statements of Changes in Net Assets
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors, and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
Financial Highlights
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios, and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the
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Useful Information About Your Portfolio Report (unaudited)
period. The next line reflects the total return for the period. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Do not confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the Portfolio’s yield because it does not take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager(s) and/or investment personnel. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Shareholder Meeting (unaudited)
A Special Meeting of Shareholders of the Portfolio was held on June 14, 2016. At the meeting, the following matter was voted on and approved by the Shareholders. Each whole or fractional vote reported represents one whole or fractional dollar of net asset value held on the record date for the meeting. The results of the Special Meeting of Shareholders are noted below.
Proposal
To elect eight Trustees, each of whom is considered “independent.”
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2016:
| |
Capital Gain Distributions | $32,862,627 |
Dividends Received Deduction Percentage | 60% |
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Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. Under the Portfolio’s Governance Procedures and Guidelines, the policy is for Trustees to retire no later than the end of the calendar year in which the Trustee turns 75. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. The Portfolio’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 58 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Except as otherwise disclosed, Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
William F. McCalpin | Chairman Trustee | 1/08-Present 6/02-Present | Managing Partner, Impact Investments, Athena Capital Advisors LLC (independent registered investment advisor) (since 2016) and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Chief Executive Officer, Imprint Capital (impact investment firm) (2013-2015) and Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 58 | Director of Mutual Fund Directors Forum (a non-profit organization serving independent directors of U.S. mutual funds), Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Alan A. Brown | Trustee | 1/13-Present | Executive Vice President, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 58 | Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of MotiveQuest LLC (strategic social market research company) (2003-2016); Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
William D. Cvengros | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 58 | Advisory Board Member, Innovate Partners Emerging |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Raudline Etienne | Trustee | 6/16-Present | Senior Advisor, Albright Stonebridge Group LLC (global strategy firm) (since 2016). Formerly, Senior Vice President (2011-2015), Albright Stonebridge Group LLC; and Deputy Comptroller and Chief Investment Officer, New York State Common Retirement Fund (public pension fund) (2008-2011). | 58 | Director of Brightwood Capital Advisors, LLC (since 2014). | |
Gary A. Poliner | Trustee | 6/16-Present | Retired. Formerly, President (2010-2013) and Executive Vice President and Chief Risk Officer (2009-2012) of Northwestern Mutual Life Insurance Company. | 58 | Director of MGIC Investment Corporation (private mortgage insurance) (since 2013) and West Bend Mutual Insurance Company (property/casualty insurance) (since 2013). Formerly, Trustee of Northwestern Mutual Life Insurance Company (2010-2013); Chairman and Director of Northwestern Mutual Series Fund, Inc. (2010-2012); and Director of Frank Russell Company (global asset management firm) (2008-2013). |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
James T. Rothe | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, L.P. (SBA SBIC fund focusing on private investment in public equity firms), and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004), and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 58 | Formerly, Director of Red Robin Gourmet Burgers, Inc. (RRGB) (2004-2014). | |
William D. Stewart | Trustee | 6/84-Present | Retired. Formerly, President and founder of HPS Products and Corporate Vice President of MKS Instruments, Boulder, CO (a provider of advanced process control systems for the semiconductor industry) (1976-2012). | 58 | None |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Linda S. Wolf | Trustee | 11/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 58 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014) and The Field Museum of Natural History (Chicago, IL) (until 2014). |
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Trustees and Officers (unaudited)
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period. |
OFFICERS | |||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Principal Occupations During the Past Five Years |
Jeremiah Buckley | Executive Vice President and Co-Portfolio Manager | 12/15-Present | Portfolio Manager for other Janus accounts. |
Marc Pinto | Executive Vice President and Co-Portfolio Manager | 5/05-Present | Vice President of Janus Capital and Portfolio Manager for other Janus accounts. |
Mayur Saigal | Executive Vice President and Co-Portfolio Manager | 12/15-Present | Portfolio Manager for other Janus accounts and Analyst for Janus Capital. |
Darrell Watters | Executive Vice President and Co-Portfolio Manager | 12/15-Present | Vice President of Janus Capital and Portfolio Manager for other Janus accounts. |
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Trustees and Officers (unaudited)
OFFICERS | |||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Principal Occupations During the Past Five Years |
Bruce L. Koepfgen | President and Chief Executive Officer | 7/14-Present | President of Janus Capital Group Inc. and Janus Capital Management LLC (since 2013); Executive Vice President and Director of Janus International Holding LLC (since 2011); Executive Vice President of Janus Distributors LLC (since 2011); Executive Vice President and Working Director of INTECH Investment Management LLC (since 2011); Executive Vice President and Director of Perkins Investment Management LLC (since 2011); and Executive Vice President and Director of Janus Management Holdings Corporation (since 2011). Formerly, Executive Vice President of Janus Services LLC (2011-2015), Janus Capital Group Inc. and Janus Capital Management LLC (2011-2013); and Chief Financial Officer of Janus Capital Group Inc., Janus Capital Management LLC, Janus Distributors LLC, Janus Management Holdings Corporation, and Janus Services LLC (2011-2013). |
David R. Kowalski | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. |
Jesper Nergaard | Chief Financial Officer | 3/05-Present | Vice President of Janus Capital and Janus Services LLC. |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period. |
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Trustees and Officers (unaudited)
OFFICERS | |||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Principal Occupations During the Past Five Years |
Kathryn L. Santoro 151 Detroit Street | Vice President, Chief Legal Counsel, and Secretary | 12/16-Present | Vice President of Janus Capital and Janus Services LLC (since 2016). Formerly, Vice President and Associate Counsel of Curian Capital, LLC and Curian Clearing LLC (2013-2016); and General Counsel and Secretary (2011-2012) and Vice President (2009-2012) of Old Mutual Capital, Inc. |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period. |
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH® (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins® (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money. | ||||||||||||
Janus, INTECH and Perkins are registered trademarks of Janus International Holding LLC. © Janus International Holding LLC. Funds distributed by Janus Distributors LLC | ||||||||||||
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | |||||||||
C-0217-7528 | 109-02-81113 02-17 |
ANNUAL REPORT December 31, 2016 | |||
Janus Aspen Enterprise Portfolio | |||
Janus Aspen Series | |||
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HIGHLIGHTS · Portfolio management perspective · Investment strategy behind your portfolio · Portfolio performance, characteristics | |||
Table of Contents
Janus Aspen Enterprise Portfolio
Janus Aspen Enterprise Portfolio (unaudited)
PERFORMANCE OVERVIEW
During the 12 months ended December 31, 2016, Janus Aspen Enterprise Portfolio’s Institutional Shares and Service Shares returned 12.36% and 12.10%, respectively. Meanwhile, the Portfolio’s benchmark, the Russell Midcap Growth Index, returned 7.33%.
INVESTMENT ENVIRONMENT
Stocks registered gains in 2016, but experienced brief bouts of volatility. Equities started the year lower due to concerns about the health of the Chinese economy and fear about how falling oil prices could affect the energy sector. The UK’s decision to leave the European Union (EU) in June’s “Brexit” referendum jolted markets, but investors soon regained their composure and sent shares higher. Stocks climbed after the November U.S. presidential election, on the expectation that the new administration would champion pro-growth initiatives.
A recovery in crude oil and other commodity prices after the early-year plunge propelled energy and materials stocks, resulting in those sectors being among the year’s best performers. Other cyclical sectors also registered gains. Given the bias toward improving economic growth, several historically defensive sectors lagged the broader market.
PERFORMANCE DISCUSSION
The portfolio outperformed its benchmark, the Russell Midcap Growth Index, during the year. Our portfolio tends to emphasize companies that have high returns on invested capital (ROIC), and that we believe have more predictable business models, recurring revenue streams and strong competitive positioning that should allow the companies to take market share and experience sustainable, long-term growth, even when the economy is less strong. We believe this focus should help the portfolio outperform when markets are down and the economy is weak, driving relative outperformance over full market cycles. Over the course of 2016, our portfolio performed as we would have expected, with much of our relative outperformance coming in the first half of the year when the economic outlook was less certain, markets were more volatile and higher quality stocks returned to favor.
Strong stock selection in the technology and health care sectors were large contributors to relative performance during the year. Within the technology sector, we held a number of companies that put up impressive results that we believe demonstrated the durability of their earnings streams. Xilinx was our top contributor to performance within the sector. During the year, the market has increasingly recognized its small but expanding business line of programmable processors. While the company is largely known for its core communications equipment, demand for its innovative processors is growing as a range of industries seek to harness the power of artificial intelligence (AI). Programmable processors are considered to be better suited to carry out many AI applications compared to more widely used serial processors. We believe that Xilinx is well positioned to grow its business in market segments that are early adopters of AI, namely data centers. Other segments where we believe AI will gain traction include automotive and homes.
Within the health care sector, Medivation was our largest contributor. The stock was up after Pfizer announced it would acquire the company. We weren’t surprised that Medivation was an acquisition target, given the long-term growth potential of its prostate cancer drug, Xtandi.
While stock selection in the technology and health care sectors were large drivers of relative outperformance during the year, the Portfolio received notable contributions from many stocks outside those two sectors. TD Ameritrade was a particularly large contributor. The stock benefited from the prospects of rising interest rates, which should boost TD Ameritrade’s earnings from reinvesting customers’ cash. While a rate increase should benefit the company, we don’t just hold the stock as a call
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Janus Aspen Enterprise Portfolio (unaudited)
on the direction of interest rates. We believe online brokers such as TD Ameritrade are poised to take market share as younger investors gravitate toward online brands that allow them to take a do-it-yourself approach to retirement planning. Further, we believe TD Ameritrade’s recent acquisition of Scottrade gives it more scale, and will allow the company to improve margins as it realizes cost synergies from the acquisition.
Even though we were pleased with the results of many companies in the Portfolio, we still held stocks that disappointed during the year. Athenahealth was our largest detractor. Concerns about the company’s growth in 2017 weighed on the stock in the fourth quarter, as did uncertainty about the Trump administration’s commitment to incentivizing health care companies to adopt better health care technology infrastructure. News that the company’s COO was leaving also negatively affected the stock. We view these issues as transitory. Late in the period, the company issued new guidance for 2017 that was more positive. Athenahealth’s cloud-based software services for electronic health records, revenue cycle management and patient care coordination have the potential to remove inefficiency from the health care system and the business rationale for adopting these services remains compelling, even if some of the tax incentives for health care companies to adopt new technology go away. We also think the management team has a deep bench and are not concerned about the chief operating officer’s departure.
Sensata Technologies was another detractor. Concerns that the auto sales cycle may have peaked have weighed on the shares of all auto suppliers, and Sensata was no exception. However, we still like the company’s long-term growth prospects. We believe the auto cycle will plateau, rather than decline sharply. Perhaps more important, we believe Sensata can grow through an entire auto sales cycle. Automobile manufacturers continue to place more of Sensata’s controls and sensors into vehicles as manufacturers adopt new technologies that assist drivers. This should allow Sensata to grow through full market cycles by growing its unit volume within vehicles, rather than just benefiting from aggregate vehicle sales.
SS&C Technologies was also a detractor. The company provides a number of investment and financial software-enabled services to asset managers, including many alternative managers. Weaker performance by some hedge funds has led to concerns the industry could shrink, and that has weighed on the stock. We believe the market is overlooking the fact that many of the alternative managers using SS&C services are private equity companies, or types of hedge funds that haven’t faced as much industry pressure. We continue to like the company. Most of its revenue comes from subscription services or software maintenance, which helps create a steadier and recurring revenue source. We also believe that SS&C is a logical consolidator of other hedge fund service providers that may look to get out of the business.
DERIVATIVES
Please see the Derivative Instruments section in the “Notes to Financial Statements” for a discussion of derivatives used by the Fund.
OUTLOOK
As we enter 2017, our thoughts on both the markets and U.S. economy can be summed up rather quickly. In a word: change. Several substantial shifts are underway, changing the market backdrop in the most meaningful way since the financial crisis. The U.S. economy appears primed for faster growth. The building blocks for economic growth were in place even before the election, but if the new administration indeed ushers in tax and regulatory reform, the economy could grow more rapidly than expected even a few months ago. That economic growth could lead to a more normalized interest rate environment, and rising rates have broad implications for both stock valuations in general, and for individual companies that benefit, or are penalized, from them. Finally, no one can be certain what policies the new administration will implement, but it is a good bet that regulations for some industries are poised for a shakeup.
The market has already anticipated some of these changes. Since the November election, valuations of cyclical companies have improved significantly relative to defensive areas of the market such as consumer staples and utility companies. So too, have valuations for the financial sector, as the market forecasts what rising rates and potential deregulation could mean for banks and other companies levered to interest rate changes.
Now comes the hard part. After stocks for select sectors and industries moved broadly in anticipation of a stronger economy, rising rates or a new regulatory regime, investors will need to discern exactly how these forces will affect individual companies, and whether all of those changes are reflected in the stock price. Investors must also prepare for how potentially rising rates could change stock valuations. In a low-rate, yield-starved environment, the market has bid up valuations for many stable
2 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio (unaudited)
businesses. Some of these companies fit our investment criteria and buying opportunities could present themselves if valuations become more reasonable. A low-rate environment has given other companies access to cheap capital. The ability for some of these companies to carry out their growth initiatives with a highly levered balance sheet could be hampered if the cost of debt rises. Investors will need to be mindful of how rising costs of capital affect each company.
After a broad rally reflecting some of the anticipated economic changes, investors will need to dig deeper to find remaining opportunities, and stay nimble as some of the new administration’s policies take shape. We welcome that challenge in the months ahead.
Thank you for your investment in Janus Aspen Enterprise Portfolio.
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Janus Aspen Enterprise Portfolio (unaudited)
Portfolio At A Glance
December 31, 2016
5 Top Performers - Holdings |
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| 5 Bottom Performers - Holdings |
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Contribution | Contribution | |||||
Medivation Inc | 0.95% | athenahealth Inc | -0.74% | |||
TD Ameritrade Holding Corp | 0.69% | Sensata Technologies Holding NV | -0.45% | |||
Ritchie Bros. Auctioneers Inc | 0.68% | SS&C Technologies Holdings Inc | -0.29% | |||
Xilinx Inc | 0.52% | LPL Financial Holdings Inc | -0.29% | |||
WEX Inc | 0.46% | Gildan Activewear Inc | -0.18% | |||
5 Top Performers - Sectors* |
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Portfolio | Portfolio Weighting | Russell Midcap Growth Index | ||||
Contribution | (Average % of Equity) | Weighting | ||||
Information Technology | 2.20% | 32.78% | 20.54% | |||
Health Care | 2.02% | 18.17% | 14.45% | |||
Consumer Discretionary | 1.45% | 10.79% | 24.22% | |||
Financials | 0.34% | 11.12% | 9.43% | |||
Real Estate | 0.31% | 1.61% | 1.56% | |||
5 Bottom Performers - Sectors* |
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Portfolio | Portfolio Weighting | Russell Midcap Growth Index | ||||
Contribution | (Average % of Equity) | Weighting | ||||
Materials | -0.51% | 1.72% | 5.08% | |||
Other** | -0.19% | 3.20% | 0.00% | |||
Energy | -0.15% | 0.97% | 1.12% | |||
Utilities | -0.01% | 0.00% | 0.09% | |||
Telecommunication Services | 0.01% | 0.00% | 0.45% | |||
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||||||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |||||
** | Not a GICS classified sector. |
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Janus Aspen Enterprise Portfolio (unaudited)
Portfolio At A Glance
December 31, 2016
5 Largest Equity Holdings - (% of Net Assets) | |
TD Ameritrade Holding Corp | |
Capital Markets | 2.6% |
Lamar Advertising Co | |
Equity Real Estate Investment Trusts (REITs) | 2.5% |
Sensata Technologies Holding NV | |
Electrical Equipment | 2.5% |
Crown Castle International Corp | |
Equity Real Estate Investment Trusts (REITs) | 2.2% |
Verisk Analytics Inc | |
Professional Services | 2.2% |
12.0% |
Asset Allocation - (% of Net Assets) | |||||
Common Stocks | 96.7% | ||||
Investment Companies | 4.2% | ||||
Preferred Stocks | 0.2% | ||||
Other | (1.1)% | ||||
100.0% |
Top Country Allocations - Long Positions - (% of Investment Securities) | |
As of December 31, 2016 | As of December 31, 2015 |
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Janus Aspen Enterprise Portfolio (unaudited)
Performance
See important disclosures on the next page. |
| Expense Ratios - | ||||||||
Average Annual Total Return - for the periods ended December 31, 2016 |
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| per the May 1, 2016 prospectuses | ||||||
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| One | Five | Ten | Since |
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| Total Annual Fund | |
Institutional Shares |
| 12.36% | 15.35% | 9.68% | 10.41% |
|
| 0.73% | |
Service Shares |
| 12.10% | 15.06% | 9.41% | 10.13% |
|
| 0.99% | |
Russell Midcap Growth Index |
| 7.33% | 13.51% | 7.83% | 9.23% |
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Morningstar Quartile - Institutional Shares |
| 1st | 1st | 1st | 1st |
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Morningstar Ranking - based on total returns for Mid-Cap Growth Funds |
| 56/667 | 22/596 | 26/546 | 23/158 |
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A Portfolio's performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, portfolio holdings and other details.
Foreign securities are subject to additional risks including currency fluctuations, political and economic uncertainty, increased volatility, lower liquidity and differing financial and information reporting standards, all of which are magnified in emerging markets.
Returns shown do not represent actual returns since they do not include insurance charges. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
See Financial Highlights for actual expense ratios during the reporting period.
Performance for Service Shares prior to December 31, 1999 reflects the performance of Institutional Shares, adjusted to reflect the expenses of Service Shares.
Ranking is for the share class shown only; other classes may have different performance characteristics.
© 2016 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
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Janus Aspen Enterprise Portfolio (unaudited)
Performance
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio's holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Effective July 1, 2016, Brian Demain and Cody Wheaton are Co-Portfolio Managers of the Portfolio.
* The Portfolio’s inception date – September 13, 1993
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Janus Aspen Enterprise Portfolio (unaudited)
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; 12b-1 distribution and shareholder servicing fees (applicable to Service Shares only); transfer agent fees and expenses payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as any charges at the separate account level or contract level. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Actual | Hypothetical | |||||||||
| Beginning | Ending | Expenses |
| Beginning | Ending | Expenses | Net Annualized | ||
Institutional Shares | $1,000.00 | $1,064.50 | $3.79 |
| $1,000.00 | $1,021.47 | $3.71 | 0.73% | ||
Service Shares | $1,000.00 | $1,063.20 | $5.13 |
| $1,000.00 | $1,020.16 | $5.03 | 0.99% | ||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
8 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Schedule of Investments
December 31, 2016
| Value | ||||||
Common Stocks – 96.7% | |||||||
Aerospace & Defense – 2.3% | |||||||
HEICO Corp | 118,804 | $8,066,792 | |||||
Teledyne Technologies Inc* | 96,017 | 11,810,091 | |||||
19,876,883 | |||||||
Air Freight & Logistics – 0.8% | |||||||
Expeditors International of Washington Inc | 135,537 | 7,178,040 | |||||
Airlines – 1.3% | |||||||
Ryanair Holdings PLC (ADR)* | 138,453 | 11,527,597 | |||||
Banks – 0.6% | |||||||
SVB Financial Group* | 28,845 | 4,951,533 | |||||
Biotechnology – 2.5% | |||||||
AbbVie Inc | 87,753 | 5,495,093 | |||||
Celgene Corp* | 112,494 | 13,021,181 | |||||
TESARO Inc*,# | 29,109 | 3,914,578 | |||||
22,430,852 | |||||||
Building Products – 1.4% | |||||||
Allegion PLC | 70,443 | 4,508,352 | |||||
AO Smith Corp | 158,636 | 7,511,415 | |||||
12,019,767 | |||||||
Capital Markets – 5.6% | |||||||
FactSet Research Systems Inc | 30,202 | 4,935,913 | |||||
LPL Financial Holdings Inc | 308,488 | 10,861,862 | |||||
MSCI Inc | 136,657 | 10,765,838 | |||||
TD Ameritrade Holding Corp | 516,792 | 22,532,131 | |||||
49,095,744 | |||||||
Chemicals – 0.5% | |||||||
Potash Corp of Saskatchewan Inc | 260,998 | 4,721,454 | |||||
Commercial Services & Supplies – 2.2% | |||||||
Edenred | 273,518 | 5,419,724 | |||||
Ritchie Bros Auctioneers Inc | 408,584 | 13,891,856 | |||||
19,311,580 | |||||||
Containers & Packaging – 1.8% | |||||||
Sealed Air Corp | 354,413 | 16,069,085 | |||||
Diversified Consumer Services – 1.6% | |||||||
ServiceMaster Global Holdings Inc* | 363,409 | 13,689,617 | |||||
Electrical Equipment – 3.1% | |||||||
AMETEK Inc | 110,692 | 5,379,631 | |||||
Sensata Technologies Holding NV* | 558,623 | 21,758,366 | |||||
27,137,997 | |||||||
Electronic Equipment, Instruments & Components – 7.0% | |||||||
Amphenol Corp | 122,044 | 8,201,357 | |||||
Belden Inc | 126,193 | 9,435,451 | |||||
Flex Ltd* | 938,916 | 13,492,223 | |||||
National Instruments Corp | 415,251 | 12,798,036 | |||||
TE Connectivity Ltd | 249,241 | 17,267,417 | |||||
61,194,484 | |||||||
Equity Real Estate Investment Trusts (REITs) – 4.7% | |||||||
Crown Castle International Corp | 222,713 | 19,324,807 | |||||
Lamar Advertising Co | 324,406 | 21,813,059 | |||||
41,137,866 | |||||||
Health Care Equipment & Supplies – 8.6% | |||||||
Boston Scientific Corp* | 806,024 | 17,434,299 | |||||
Cooper Cos Inc | 32,825 | 5,742,077 | |||||
DexCom Inc* | 83,594 | 4,990,562 | |||||
Masimo Corp* | 74,230 | 5,003,102 | |||||
STERIS PLC | 207,155 | 13,960,175 | |||||
Teleflex Inc | 63,436 | 10,222,711 | |||||
Varian Medical Systems Inc* | 199,197 | 17,883,907 | |||||
75,236,833 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
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Janus Aspen Enterprise Portfolio
Schedule of Investments
December 31, 2016
| Value | ||||||
Common Stocks – (continued) | |||||||
Health Care Providers & Services – 1.2% | |||||||
Henry Schein Inc* | 68,386 | $10,374,840 | |||||
Health Care Technology – 1.5% | |||||||
athenahealth Inc* | 124,917 | 13,137,521 | |||||
Hotels, Restaurants & Leisure – 2.3% | |||||||
Dunkin' Brands Group Inc | 285,274 | 14,959,769 | |||||
Norwegian Cruise Line Holdings Ltd* | 123,494 | 5,252,200 | |||||
20,211,969 | |||||||
Industrial Conglomerates – 0.7% | |||||||
Roper Technologies Inc | 32,548 | 5,958,888 | |||||
Information Technology Services – 8.5% | |||||||
Amdocs Ltd | 284,522 | 16,573,407 | |||||
Broadridge Financial Solutions Inc | 154,431 | 10,238,775 | |||||
Fidelity National Information Services Inc | 97,275 | 7,357,881 | |||||
Gartner Inc* | 63,172 | 6,384,794 | |||||
Global Payments Inc | 114,208 | 7,927,177 | |||||
Jack Henry & Associates Inc | 121,165 | 10,757,029 | |||||
WEX Inc* | 138,445 | 15,450,462 | |||||
74,689,525 | |||||||
Insurance – 1.7% | |||||||
Aon PLC | 136,556 | 15,230,091 | |||||
Internet Software & Services – 2.6% | |||||||
Cimpress NV* | 146,475 | 13,418,575 | |||||
CoStar Group Inc* | 51,156 | 9,642,394 | |||||
23,060,969 | |||||||
Leisure Products – 0.5% | |||||||
Polaris Industries Inc# | 55,531 | 4,575,199 | |||||
Life Sciences Tools & Services – 4.4% | |||||||
PerkinElmer Inc | 285,095 | 14,867,704 | |||||
Quintiles IMS Holdings Inc* | 183,665 | 13,967,723 | |||||
Waters Corp* | 72,278 | 9,713,440 | |||||
38,548,867 | |||||||
Machinery – 2.1% | |||||||
Middleby Corp* | 44,214 | 5,695,205 | |||||
Rexnord Corp* | 441,773 | 8,654,333 | |||||
Wabtec Corp/DE | 52,505 | 4,358,965 | |||||
18,708,503 | |||||||
Media – 1.2% | |||||||
Omnicom Group Inc | 125,503 | 10,681,560 | |||||
Multiline Retail – 1.1% | |||||||
Dollar General Corp | 75,737 | 5,609,840 | |||||
Dollar Tree Inc* | 52,286 | 4,035,433 | |||||
9,645,273 | |||||||
Oil, Gas & Consumable Fuels – 0.9% | |||||||
World Fuel Services Corp | 178,144 | 8,178,591 | |||||
Professional Services – 3.0% | |||||||
IHS Markit Ltd* | 207,185 | 7,336,421 | |||||
Verisk Analytics Inc*,† | 234,959 | 19,071,622 | |||||
26,408,043 | |||||||
Road & Rail – 1.7% | |||||||
Canadian Pacific Railway Ltd | 49,264 | 7,033,421 | |||||
Old Dominion Freight Line Inc* | 91,975 | 7,890,535 | |||||
14,923,956 | |||||||
Semiconductor & Semiconductor Equipment – 6.8% | |||||||
KLA-Tencor Corp | 152,971 | 12,035,758 | |||||
Lam Research Corp | 98,968 | 10,463,887 | |||||
Microchip Technology Inc | 155,482 | 9,974,170 | |||||
ON Semiconductor Corp* | 865,251 | 11,040,603 | |||||
Xilinx Inc | 271,663 | 16,400,295 | |||||
59,914,713 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
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Janus Aspen Enterprise Portfolio
Schedule of Investments
December 31, 2016
| Value | ||||||
Common Stocks – (continued) | |||||||
Software – 8.8% | |||||||
Atlassian Corp PLC* | 349,128 | $8,407,002 | |||||
Cadence Design Systems Inc* | 517,565 | 13,052,989 | |||||
Constellation Software Inc/Canada | 36,314 | 16,503,462 | |||||
Intuit Inc | 84,534 | 9,688,442 | |||||
Nice Ltd (ADR) | 246,748 | 16,966,393 | |||||
SS&C Technologies Holdings Inc | 436,096 | 12,472,346 | |||||
77,090,634 | |||||||
Specialty Retail – 1.0% | |||||||
Tractor Supply Co | 48,569 | 3,682,016 | |||||
Williams-Sonoma Inc | 111,577 | 5,399,211 | |||||
9,081,227 | |||||||
Textiles, Apparel & Luxury Goods – 2.7% | |||||||
Carter's Inc | 69,676 | 6,019,310 | |||||
Gildan Activewear Inc | 503,751 | 12,780,163 | |||||
Wolverine World Wide Inc | 224,717 | 4,932,538 | |||||
23,732,011 | |||||||
Total Common Stocks (cost $577,949,244) | 849,731,712 | ||||||
Preferred Stocks – 0.2% | |||||||
Electronic Equipment, Instruments & Components – 0.2% | |||||||
Belden Inc, 6.7500% (cost $1,200,000) | 12,000 | 1,268,040 | |||||
Investment Companies – 4.2% | |||||||
Investments Purchased with Cash Collateral from Securities Lending – 0.7% | |||||||
Janus Cash Collateral Fund LLC, 0.4311%ºº,£ | 6,464,316 | 6,464,316 | |||||
Money Markets – 3.5% | |||||||
Janus Cash Liquidity Fund LLC, 0.4708%ºº,£ | 30,395,468 | 30,395,468 | |||||
Total Investment Companies (cost $36,859,784) | 36,859,784 | ||||||
Total Investments (total cost $616,009,028) – 101.1% | 887,859,536 | ||||||
Liabilities, net of Cash, Receivables and Other Assets – (1.1)% | (9,358,410) | ||||||
Net Assets – 100% | $878,501,126 |
Summary of Investments by Country - (Long Positions) (unaudited) | |||||
% of | |||||
Investment | |||||
Country | Value | Securities | |||
United States | $783,272,043 | 88.2 | % | ||
Canada | 54,930,356 | 6.2 | |||
Israel | 16,966,393 | 1.9 | |||
Ireland | 11,527,597 | 1.3 | |||
Australia | 8,407,002 | 1.0 | |||
United Kingdom | 7,336,421 | 0.8 | |||
France | 5,419,724 | 0.6 |
Total | $887,859,536 | 100.0 | % |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
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Janus Aspen Enterprise Portfolio
Schedule of Investments
December 31, 2016
Schedule of Foreign Currency Contracts, Open |
Counterparty/ Currency | Settlement Date | Currency Units Sold | Currency Value | Unrealized Appreciation/ (Depreciation) | ||||
Bank of America: | ||||||||
Euro | 1/12/17 | 1,165,000 | $ | 1,226,769 | $ | 13,379 | ||
Barclays Capital, Inc.: | ||||||||
Canadian Dollar | 2/23/17 | 790,000 | 588,858 | (6,373) | ||||
Euro | 1/19/17 | 1,020,000 | 1,074,548 | 8,520 | ||||
Euro | 2/23/17 | 3,072,000 | 3,241,942 | (37,447) | ||||
4,905,348 | (35,300) | |||||||
Citibank NA: | ||||||||
Canadian Dollar | 1/19/17 | 2,431,000 | 1,811,221 | 30,831 | ||||
Euro | 1/19/17 | 1,543,000 | 1,625,517 | 15,076 | ||||
3,436,738 | 45,907 | |||||||
HSBC Securities (USA), Inc.: | ||||||||
Canadian Dollar | 1/19/17 | 2,354,000 | 1,753,852 | 29,056 | ||||
Euro | 1/19/17 | 1,012,000 | 1,066,120 | 10,076 | ||||
2,819,972 | 39,132 | |||||||
JPMorgan Chase & Co.: | ||||||||
Euro | 1/12/17 | 3,852,000 | 4,056,237 | 47,199 | ||||
RBC Capital Markets Corp.: | ||||||||
Canadian Dollar | 2/9/17 | 3,481,000 | 2,594,274 | (23,399) | ||||
Euro | 2/9/17 | 3,604,000 | 3,801,010 | (24,945) | ||||
6,395,284 | (48,344) | |||||||
Total | $ | 22,840,348 | $ | 61,973 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
12 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Notes to Schedule of Investments and Other Information
Russell Midcap® Growth Index | Measures the performance of those Russell Midcap® companies with higher price-to-book ratios and higher forecasted growth values. |
ADR | American Depositary Receipt |
LLC | Limited Liability Company |
PLC | Public Limited Company |
* | Non-income producing security. |
† | A portion of this security has been segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, options contracts, short sales, swap agreements, and/or securities with extended settlement dates, the value of which, as of December 31, 2016, is $17,857,400. |
ºº | Rate shown is the 7-day yield as of December 31, 2016. |
# | Loaned security; a portion of the security is on loan at December 31, 2016. |
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. The following securities were considered affiliated companies for all or some portion of the year ended December 31, 2016. Unless otherwise indicated, all information in the table is for the year ended December 31, 2016. |
Share | Share | ||||||||||||||
Balance | Balance | Realized | Dividend | Value | |||||||||||
at 12/31/15 | Purchases | Sales | at 12/31/16 | Gain/(Loss) | Income | at 12/31/16 | |||||||||
Janus Cash Collateral Fund LLC | 43,430,390 | 204,213,727 | (241,179,801) | 6,464,316 | $— | $341,602(1) | $6,464,316 | ||||||||
Janus Cash Liquidity Fund LLC | 30,205,954 | 140,508,514 | (140,319,000) | 30,395,468 | — | 98,139 | 30,395,468 | ||||||||
Total | $— | $439,741 | $36,859,784 | ||||||||||||
(1) | Net of income paid to the securities lending agent and rebates paid to the borrowing counterparties. |
Janus Aspen Series | 13 |
Janus Aspen Enterprise Portfolio
Notes to Schedule of Investments and Other Information
The following is a summary of the inputs that were used to value the Portfolio’s investments in securities and other financial instruments as of December 31, 2016. See Notes to Financial Statements for more information. | |||||||||||||
Valuation Inputs Summary | |||||||||||||
Level 2 - | Level 3 - | ||||||||||||
Level 1 - | Other Significant | Significant | |||||||||||
Quotes Prices | Observable Inputs | Unobservable Inputs | |||||||||||
Assets | |||||||||||||
Investments in Securities | |||||||||||||
Common Stocks | |||||||||||||
Commercial Services & Supplies | $ | 13,891,856 | $ | 5,419,724 | $ | - | |||||||
Software | 60,587,172 | 16,503,462 | - | ||||||||||
All Other | 753,329,498 | - | - | ||||||||||
Preferred Stocks | - | 1,268,040 | - | ||||||||||
Investment Companies | - | 36,859,784 | - | ||||||||||
Total Investments in Securities | $ | 827,808,526 | $ | 60,051,010 | $ | - | |||||||
Other Financial Instruments(a): | |||||||||||||
Forward Currency Contracts | - | 154,137 | - | ||||||||||
Total Assets | $ | 827,808,526 | $ | 60,205,147 | $ | - | |||||||
Liabilities | |||||||||||||
Other Financial Instruments(a): | |||||||||||||
Forward Currency Contracts | $ | - | $ | 92,164 | $ | - | |||||||
(a) | Other financial instruments include forward currency, futures, written options, written swaptions, and swap contracts. Forward currency contracts are reported at their unrealized appreciation/(depreciation) at measurement date, which represents the change in the contract's value from trade date. Futures, certain written options on futures, and centrally cleared swap contracts are reported at their variation margin at measurement date, which represents the amount due to/from the Portfolio at that date. Written options, written swaptions, and other swap contracts are reported at their market value at measurement date. |
14 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Statement of Assets and Liabilities
December 31, 2016
|
|
|
|
|
|
|
Assets: | ||||||
Investments, at cost | $ | 616,009,028 | ||||
Unaffiliated investments, at value(1) | 850,999,752 | |||||
Affiliated investments, at value | 36,859,784 | |||||
Cash | 868 | |||||
Forward currency contracts | 154,137 | |||||
Closed foreign currency contracts | 169,235 | |||||
Non-interested Trustees' deferred compensation | 16,306 | |||||
Receivables: | ||||||
Investments sold | 1,323,896 | |||||
Portfolio shares sold | 464,740 | |||||
Dividends | 366,180 | |||||
Dividends from affiliates | 10,313 | |||||
Foreign tax reclaims | 7,163 | |||||
Other assets | 10,621 | |||||
Total Assets |
|
| 890,382,995 |
| ||
Liabilities: | ||||||
Collateral for securities loaned (Note 3) | 6,464,316 | |||||
Forward currency contracts | 92,164 | |||||
Closed foreign currency contracts | 1,027 | |||||
Payables: | — | |||||
Investments purchased | 4,006,055 | |||||
Portfolio shares repurchased | 603,638 | |||||
Advisory fees | 510,399 | |||||
12b-1 Distribution and shareholder servicing fees | 94,671 | |||||
Transfer agent fees and expenses | 41,997 | |||||
Professional fees | 22,109 | |||||
Non-interested Trustees' deferred compensation fees | 16,306 | |||||
Portfolio administration fees | 7,576 | |||||
Non-interested Trustees' fees and expenses | 6,901 | |||||
Custodian fees | 2,892 | |||||
Accrued expenses and other payables | 11,818 | |||||
Total Liabilities |
|
| 11,881,869 |
| ||
Net Assets |
| $ | 878,501,126 |
| ||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus) | $ | 536,334,006 | ||||
Undistributed net investment income/(loss) | 2,563,393 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions | 67,690,264 | |||||
Unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 271,913,463 | |||||
Total Net Assets |
| $ | 878,501,126 |
| ||
Net Assets - Institutional Shares | $ | 459,250,028 | ||||
Shares Outstanding, $0.01 Par Value (unlimited shares authorized) | 7,748,613 | |||||
Net Asset Value Per Share |
| $ | 59.27 |
| ||
Net Assets - Service Shares | $ | 419,251,098 | ||||
Shares Outstanding, $0.01 Par Value (unlimited shares authorized) | 7,457,333 | |||||
Net Asset Value Per Share |
| $ | 56.22 |
|
(1) Includes $6,332,348 of securities on loan. See Note 3 in Notes to Financial Statements. |
See Notes to Financial Statements. | |
Janus Aspen Series | 15 |
Janus Aspen Enterprise Portfolio
Statement of Operations
For the year ended December 31, 2016
|
|
|
|
|
|
Investment Income: | |||||
| Dividends | $ | 9,431,961 | ||
Affiliated securities lending income, net | 341,602 | ||||
Dividends from affiliates | 98,139 | ||||
Other income | 47 | ||||
Foreign tax withheld | (202,192) | ||||
Total Investment Income |
| 9,669,557 |
| ||
Expenses: | |||||
Advisory fees | 5,166,682 | ||||
12b-1Distribution and shareholder servicing fees: | |||||
Service Shares | 932,619 | ||||
Transfer agent administrative fees and expenses: | |||||
Institutional Shares | 151,959 | ||||
Service Shares | 133,422 | ||||
Other transfer agent fees and expenses: | |||||
Institutional Shares | 8,180 | ||||
Service Shares | 4,114 | ||||
Portfolio administration fees | 72,844 | ||||
Shareholder reports expense | 54,612 | ||||
Professional fees | 45,899 | ||||
Non-interested Trustees’ fees and expenses | 26,262 | ||||
Registration fees | 20,789 | ||||
Custodian fees | 17,702 | ||||
Other expenses | 124,024 | ||||
Total Expenses |
| 6,759,108 |
| ||
Net Investment Income/(Loss) |
| 2,910,449 |
| ||
Net Realized Gain/(Loss) on Investments: | |||||
Investments and foreign currency transactions | 68,045,643 | ||||
Total Net Realized Gain/(Loss) on Investments |
| 68,045,643 |
| ||
Change in Unrealized Net Appreciation/Depreciation: | |||||
Investments, foreign currency translations and non-interested Trustees’ deferred compensation | 24,741,659 | ||||
Total Change in Unrealized Net Appreciation/Depreciation |
| 24,741,659 |
| ||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 95,697,751 |
| ||
See Notes to Financial Statements. | |
16 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Statements of Changes in Net Assets
|
|
| Year ended |
| Year ended | |||
Operations: | ||||||||
Net investment income/(loss) | $ | 2,910,449 | $ | 2,442,446 | ||||
Net realized gain/(loss) on investments | 68,045,643 | 66,010,415 | ||||||
Change in unrealized net appreciation/depreciation | 24,741,659 | (41,750,997) | ||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations |
| 95,697,751 |
|
| 26,701,864 | |||
Dividends and Distributions to Shareholders: | ||||||||
Dividends from Net Investment Income | ||||||||
Institutional Shares | (643,985) | (2,737,465) | ||||||
Service Shares | (98,035) | (1,623,824) | ||||||
| Total Dividends from Net Investment Income |
| (742,020) |
|
| (4,361,289) | ||
Distributions from Net Realized Gain from Investment Transactions | ||||||||
Institutional Shares | (34,561,214) | (44,791,680) | ||||||
Service Shares | (31,048,820) | (32,958,607) | ||||||
| Total Distributions from Net Realized Gain from Investment Transactions | (65,610,034) |
|
| (77,750,287) | |||
Net Decrease from Dividends and Distributions to Shareholders |
| (66,352,054) |
|
| (82,111,576) | |||
Capital Share Transactions: | ||||||||
Institutional Shares | 25,003,153 | 31,033,269 | ||||||
Service Shares | 84,512,086 | 67,881,071 | ||||||
Net Increase/(Decrease) from Capital Share Transactions |
| 109,515,239 |
|
| 98,914,340 | |||
Net Increase/(Decrease) in Net Assets |
| 138,860,936 |
|
| 43,504,628 | |||
Net Assets: | ||||||||
Beginning of period | 739,640,190 | 696,135,562 | ||||||
| End of period | $ | 878,501,126 |
| $ | 739,640,190 | ||
Undistributed Net Investment Income/(Loss) | $ | 2,563,393 |
| $ | 423,315 |
See Notes to Financial Statements. | |
Janus Aspen Series | 17 |
Janus Aspen Enterprise Portfolio
Financial Highlights
Institutional Shares | ||||||||||||||||||
For a share outstanding during each year ended December 31 |
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
| |||
Net Asset Value, Beginning of Period |
| $57.33 |
|
| $61.75 |
|
| $58.96 |
|
| $44.77 |
|
| $38.17 |
| |||
Income/(Loss) from Investment Operations: | ||||||||||||||||||
Net investment income/(loss) | 0.28(1) | 0.27(1) | 0.27(1) | 0.22 | 0.30 | |||||||||||||
Net realized and unrealized gain/(loss) | 6.50 | 2.55 | 6.79 | 14.23 | 6.30 | |||||||||||||
Total from Investment Operations |
| 6.78 |
|
| 2.82 |
|
| 7.06 |
|
| 14.45 |
|
| 6.60 |
| |||
Less Dividends and Distributions: | ||||||||||||||||||
Dividends (from net investment income) | (0.09) | (0.40) | (0.10) | (0.26) | — | |||||||||||||
Distributions (from capital gains) | (4.75) | (6.84) | (4.17) | — | — | |||||||||||||
Total Dividends and Distributions |
| (4.84) |
|
| (7.24) |
|
| (4.27) |
|
| (0.26) |
|
| — |
| |||
Net Asset Value, End of Period | $59.27 | $57.33 | $61.75 | $58.96 | $44.77 | |||||||||||||
Total Return* |
| 12.36% |
|
| 4.05% |
|
| 12.50% |
|
| 32.38% |
|
| 17.29% |
| |||
Net Assets, End of Period (in thousands) | $459,250 | $418,158 | $417,895 | $407,049 | $341,699 | |||||||||||||
Average Net Assets for the Period (in thousands) | $435,190 | $427,941 | $402,634 | $373,893 | $344,014 | |||||||||||||
Ratios to Average Net Assets**: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Ratio of Gross Expenses | 0.72% | 0.68% | 0.68% | 0.69% | 0.69% | |||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) | 0.72% | 0.68% | 0.68% | 0.69% | 0.69% | |||||||||||||
Ratio of Net Investment Income/(Loss) | 0.48% | 0.44% | 0.45% | 0.28% | 0.52% | |||||||||||||
Portfolio Turnover Rate | 20% | 22% | 16% | 15% | 15% | |||||||||||||
1 |
Service Shares | ||||||||||||||||||
For a share outstanding during each year ended December 31 |
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
| |||
Net Asset Value, Beginning of Period |
| $54.67 |
|
| $59.26 |
|
| $56.80 |
|
| $43.18 |
|
| $36.91 |
| |||
Income/(Loss) from Investment Operations: | ||||||||||||||||||
Net investment income/(loss) | 0.12(1) | 0.11(1) | 0.12(1) | (0.03) | 0.09 | |||||||||||||
Net realized and unrealized gain/(loss) | 6.19 | 2.45 | 6.53 | 13.83 | 6.18 | |||||||||||||
Total from Investment Operations |
| 6.31 |
|
| 2.56 |
|
| 6.65 |
|
| 13.80 |
|
| 6.27 |
| |||
Less Dividends and Distributions: | ||||||||||||||||||
Dividends (from net investment income) | (0.01) | (0.31) | (0.02) | (0.18) | — | |||||||||||||
Distributions (from capital gains) | (4.75) | (6.84) | (4.17) | — | — | |||||||||||||
Total Dividends and Distributions |
| (4.76) |
|
| (7.15) |
|
| (4.19) |
|
| (0.18) |
|
| — |
| |||
Net Asset Value, End of Period | $56.22 | $54.67 | $59.26 | $56.80 | $43.18 | |||||||||||||
Total Return* |
| 12.10% |
|
| 3.77% |
|
| 12.24% |
|
| 32.04% |
|
| 16.99% |
| |||
Net Assets, End of Period (in thousands) | $419,251 | $321,482 | $278,240 | $260,670 | $212,971 | |||||||||||||
Average Net Assets for the Period (in thousands) | $373,400 | $299,393 | $262,698 | $234,925 | $206,153 | |||||||||||||
Ratios to Average Net Assets**: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Ratio of Gross Expenses | 0.97% | 0.94% | 0.93% | 0.94% | 0.94% | |||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) | 0.97% | 0.94% | 0.93% | 0.94% | 0.94% | |||||||||||||
Ratio of Net Investment Income/(Loss) | 0.22% | 0.19% | 0.20% | 0.03% | 0.28% | |||||||||||||
Portfolio Turnover Rate | 20% | 22% | 16% | 15% | 15% | |||||||||||||
* Total return not annualized for periods of less than one full year. ** Annualized for periods of less than one full year. (1) Per share amounts are calculated based on average shares outstanding during the year or period. |
See Notes to Financial Statements. | |
18 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Janus Aspen Enterprise Portfolio (the “Portfolio”) is a series fund. The Portfolio is part of Janus Aspen Series (the “Trust”), which is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and therefore has applied the specialized accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. The Trust offers twelve portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio seeks long-term growth of capital. The Portfolio is classified as diversified, as defined in the 1940 Act.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Each class represents an interest in the same portfolio of investments. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
Shareholders, including other portfolios, participating insurance companies, as well as accounts, may from time to time own (beneficially or of record) a significant percentage of the Portfolio’s Shares and can be considered to “control” the Portfolio when that ownership exceeds 25% of the Portfolio’s assets (and which may differ from control as determined in accordance with accounting principles generally accepted in the United States of America).
The following accounting policies have been followed by the Portfolio and are in conformity with accounting principles generally accepted in the United States of America.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is no current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). The Portfolio will determine the market value of individual securities held by it by using prices provided by one or more approved professional pricing services or, as needed, by obtaining market quotations from independent broker-dealers. Most debt securities are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Certain short-term securities maturing within 60 days or less may be evaluated and valued on an amortized cost basis provided that the amortized cost determined approximates market value. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. Special valuation considerations may apply with respect to “odd-lot” fixed-income transactions which, due to their small size, may receive evaluated prices by pricing services which reflect a large block trade and not what actually could be obtained for the odd-lot position. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Valuation Inputs Summary
FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements regarding fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that
Janus Aspen Series | 19 |
Janus Aspen Enterprise Portfolio
Notes to Financial Statements
market participants would use in pricing an asset or liability and establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. These inputs are summarized into three broad levels:
Level 1 – Unadjusted quoted prices in active markets the Portfolio has the ability to access for identical assets or liabilities.
Level 2 – Observable inputs other than unadjusted quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Assets or liabilities categorized as Level 2 in the hierarchy generally include: debt securities fair valued in accordance with the evaluated bid or ask prices supplied by a pricing service; securities traded on OTC markets and listed securities for which no sales are reported that are fair valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees; certain short-term debt securities with maturities of 60 days or less that are fair valued at amortized cost; and equity securities of foreign issuers whose fair value is determined by using systematic fair valuation models provided by independent third parties in order to adjust for stale pricing which may occur between the close of certain foreign exchanges and the close of the NYSE. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, swaps, investments in unregistered investment companies, options, and forward contracts.
Level 3 – Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the Portfolio’s own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for fair valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2016 to fair value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year. The following describes the amounts of transfers between Level 1, Level 2 and Level 3 of the fair value hierarchy during the year.
Financial assets of $15,667,024 were transferred out of Level 1 to Level 2 since certain foreign equity prices were applied a fair valuation adjustment factor at the end of the current period and no factor was applied at the end of the prior fiscal year.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Portfolio is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and
20 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Notes to Financial Statements
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Indemnifications
In the normal course of business, the Portfolio may enter into contracts that contain provisions for indemnification of other parties against certain potential liabilities. The Portfolio’s maximum exposure under these arrangements is unknown, and would involve future claims that may be made against the Portfolio that have not yet occurred. Currently, the risk of material loss from such claims is considered remote.
Foreign Currency Translations
The Portfolio does not isolate that portion of the results of operations resulting from the effect of changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held at the date of the financial statements. Net unrealized appreciation or depreciation of investments and foreign currency translations arise from changes in the value of assets and liabilities, including investments in securities held at the date of the financial statements, resulting from changes in the exchange rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and receivables that are denominated in foreign currencies. The payables and receivables are generally related to foreign security transactions and income translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, counterparty risk, political and economic risk, regulatory risk and equity risk. Risks may arise from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividends and Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
2. Derivative Instruments
The Portfolio may invest in various types of derivatives, which may at times result in significant derivative exposure. A derivative is a financial instrument whose performance is derived from the performance of another asset. The Portfolio may invest in derivative instruments including, but not limited to: futures contracts, put options, call options, options on future contracts, options on foreign currencies, options on recovery locks, options on security and commodity indices, swaps, forward contracts, structured investments, and other equity-linked derivatives. Each derivative instrument that was held by the Portfolio during the year ended December 31, 2016 is discussed in further detail below. A summary of derivative activity by the Fund is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging purposes (to offset risks associated with an investment, currency exposure, or market conditions), to adjust currency exposure relative to a benchmark index, or for speculative purposes (to earn income and seek to enhance returns). When the Portfolio invests in a derivative for speculative purposes, the Portfolio will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The Portfolio may not use any derivative to gain exposure to an asset or class of assets that it would be prohibited by its investment restrictions from purchasing directly. The Portfolio’s ability to use derivative instruments may also be limited by tax considerations.
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Notes to Financial Statements
Investments in derivatives in general are subject to market risks that may cause their prices to fluctuate over time. Investments in derivatives may not directly correlate with the price movements of the underlying instrument. As a result, the use of derivatives may expose the Portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The use of derivatives may result in larger losses or smaller gains than otherwise would be the case. Derivatives can be volatile and may involve significant risks.
In pursuit of its investment objective, the Portfolio may seek to use derivatives to increase or decrease exposure to the following market risk factors:
· Commodity Risk – the risk related to the change in value of commodities or commodity-linked investments due to changes in the overall market movements, volatility of the underlying benchmark, changes in interest rates, or other factors affecting a particular industry of commodity such as drought, floods, weather, livestock disease, embargoes, tariffs, and international economic, political, and regulatory developments.
· Counterparty Risk – the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Portfolio.
· Credit Risk – the risk an issuer will be unable to make principal and interest payments when due, or will default on its obligations.
· Currency Risk – the risk that changes in the exchange rate between currencies will adversely affect the value (in U.S. dollar terms) of an investment.
· Equity Risk – the risk related to the change in value of equity securities as they relate to increases or decreases in the general market.
· Index Risk – if the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Portfolio could receive lower interest payments or experience a reduction in the value of the derivative to below what the Portfolio paid. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index.
· Interest Rate Risk – the risk that the value of fixed-income securities will generally decline as prevailing interest rates rise, which may cause the Portfolio’s NAV to likewise decrease.
· Leverage Risk – the risk associated with certain types of leveraged investments or trading strategies pursuant to which relatively small market movements may result in large changes in the value of an investment. The Portfolio creates leverage by investing in instruments, including derivatives, where the investment loss can exceed the original amount invested. Certain investments or trading strategies, such as short sales, that involve leverage can result in losses that greatly exceed the amount originally invested.
· Liquidity Risk – the risk that certain securities may be difficult or impossible to sell at the time that the seller would like or at the price that the seller believes the security is currently worth.
Derivatives may generally be traded OTC or on an exchange. Derivatives traded OTC are agreements that are individually negotiated between parties and can be tailored to meet a purchaser’s needs. OTC derivatives are not guaranteed by a clearing agency and may be subject to increased credit risk.
In an effort to mitigate credit risk associated with derivatives traded OTC, the Portfolio may enter into collateral agreements with certain counterparties whereby, subject to certain minimum exposure requirements, the Portfolio may require the counterparty to post collateral if the Portfolio has a net aggregate unrealized gain on all OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital’s ability to establish and maintain appropriate systems and trading.
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is an obligation to buy or sell a specified currency at a future date at a negotiated rate (which may be U.S. dollars or a foreign currency). The Portfolio may enter into forward currency contracts for hedging purposes, including, but not limited to, reducing exposure to changes in foreign currency exchange rates on foreign portfolio holdings and locking in the U.S. dollar cost of firm purchase and sale commitments for securities denominated in or exposed to foreign currencies. The Portfolio may also invest in
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Notes to Financial Statements
forward currency contracts for nonhedging purposes such as seeking to enhance returns. The Portfolio is subject to currency risk and counterparty risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
Forward currency contracts are valued by converting the foreign value to U.S. dollars by using the current spot U.S. dollar exchange rate and/or forward rate for that currency. Exchange and forward rates as of the close of the NYSE shall be used to value the forward currency contracts.
The unrealized appreciation/(depreciation) for forward currency contracts is reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations for the change in unrealized net appreciation/depreciation (if applicable). The gain or loss arising from the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars upon closing a forward currency contract is reported on the Statement of Operations (if applicable).
During the year, the Portfolio entered into forward currency contracts with the obligation to sell foreign currencies in the future at an agreed upon rate in order to decrease exposure to currency risk associated with foreign currency denominated securities held by the Portfolio.
During the year ended December 31, 2016, the average ending monthly currency value amounts on sold forward currency contracts is $19,258,621.
The following table, grouped by derivative type, provides information about the fair value and location of derivatives within the Statement of Assets and Liabilities as of December 31, 2016.
Fair Value of Derivative Instruments (not accounted for as hedging instruments) as of December 31, 2016 | ||||
|
|
| Currency |
|
Asset Derivatives: | ||||
Forward currency contracts | $154,137 | |||
Liability Derivatives: | ||||
Forward currency contracts | $ 92,164 | |||
The following tables provide information about the effect of derivatives and hedging activities on the Portfolio’s Statement of Operations for the year ended December 31, 2016.
The effect of Derivative Instruments (not accounted for as hedging instruments) on the Statement of Operations for the year ended December 31, 2016 | ||||
Amount of Realized Gain/(Loss) Recognized on Derivatives | ||||
Derivative | Currency |
| ||
Investments and foreign currency transactions | $ 617,050 | |||
Amount of Change in Unrealized Appreciation/Depreciation Recognized on Derivatives | ||||
Derivative | Currency |
| ||
Investments, foreign currency translations and non-interested Trustees' deferred compensation | $(121,368) | |||
(a) | Amounts relate to purchased options. |
Please see the “Net Realized Gain/(Loss) on Investments” and “Change in Unrealized Net Appreciation/Depreciation” sections of the Portfolio’s Statement of Operations.
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Notes to Financial Statements
3. Other Investments and Strategies
Additional Investment Risk
The financial crisis in both the U.S. and global economies over the past several years has resulted, and may continue to result, in a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks, took steps to support the financial markets. The withdrawal of this support, a failure of measures put in place to respond to the crisis, or investor perception that such efforts were not sufficient could each negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries continue to impact many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. As a result, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) provided for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expanded federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act remain pending and will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced, and may continue to experience, severe economic and financial difficulties. In particular, many EU nations are susceptible to economic risks associated with high levels of debt, notably due to investments in sovereign debt of countries such as Greece, Italy, Spain, Portugal, and Ireland. Many non-governmental issuers, and even certain governments, have defaulted on, or been forced to restructure, their debts. Many other issuers have faced difficulties obtaining credit or refinancing existing obligations. Financial institutions have in many cases required government or central bank support, have needed to raise capital, and/or have been impaired in their ability to extend credit. As a result, financial markets in the EU experienced extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world. Greece, Ireland, and Portugal have already received one or more "bailouts" from other Eurozone member states, and it is unclear how much additional funding they will require or if additional Eurozone member states will require bailouts in the future. The risk of investing in securities in the European markets may also be heightened due to the referendum in which the United Kingdom voted to exit the EU (known as “Brexit”). One or more other countries may also abandon the euro and/or withdraw from the EU, placing its currency and banking system in jeopardy.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not. A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk with respect to financial
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Notes to Financial Statements
assets and liabilities approximates its carrying value. See the "Offsetting Assets and Liabilities" section of this Note for further details.
The Portfolio may be exposed to counterparty risk through participation in various programs, including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Offsetting Assets and Liabilities
The Portfolio presents gross and net information about transactions that are either offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement with a designated counterparty, regardless of whether the transactions are actually offset in the Statement of Assets and Liabilities.
In order to better define its contractual rights and to secure rights that will help the Portfolio mitigate its counterparty risk, the Portfolio has entered into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Portfolio and a counterparty that governs OTC derivatives and forward foreign currency exchange contracts and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, in the event of a default and/or termination event, the Portfolio may offset with each counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. For financial reporting purposes, the Portfolio does not offset certain derivative financial instruments’ payables and receivables and related collateral on the Statement of Assets and Liabilities.
The following tables present gross amounts of recognized assets and/or liabilities and the net amounts after deducting collateral that has been pledged by counterparties or has been pledged to counterparties (if applicable). For corresponding information grouped by type of instrument, see either the “Fair Value of Derivative Instruments as of December 31, 2016” table located in Note 2 of these Notes to Financial Statements and/or the Portfolio’s Schedule of Investments.
Offsetting of Financial Assets and Derivative Assets | |||||||||
Gross Amounts | |||||||||
of Recognized | Offsetting Asset | Collateral | |||||||
Counterparty | Assets | or Liability(a) | Pledged(b) | Net Amount | |||||
Bank of America | $ | 13,379 | $ | — | $ | — | $ | 13,379 | |
Barclays Capital, Inc. | 8,520 | (8,520) | — | — | |||||
Citibank NA | 45,907 | — | — | 45,907 | |||||
Deutsche Bank AG | 6,332,348 | — | (6,332,348) | — | |||||
HSBC Securities (USA), Inc. | 39,132 | — | — | 39,132 | |||||
JPMorgan Chase & Co. | 47,199 | — | — | 47,199 | |||||
Total | $ | 6,486,485 | $ | (8,520) | $ | (6,332,348) | $ | 145,617 | |
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross Amounts | |||||||||
of Recognized | Offsetting Asset | Collateral | |||||||
Counterparty | Liabilities | or Liability(a) | Pledged(b) | Net Amount | |||||
Barclays Capital, Inc. | $ | 43,820 | $ | (8,520) | $ | — | $ | 35,300 | |
RBC Capital Markets Corp. | 48,344 | — | — | 48,344 | |||||
Total | $ | 92,164 | $ | (8,520) | $ | — | $ | 83,644 | |
(a) | Represents the amount of assets or liabilities that could be offset with the same counterparty under master netting or similar agreements that management elects not to offset on the Statement of Assets and Liabilities. |
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(b) | Collateral pledged is limited to the net outstanding amount due to/from an individual counterparty. The actual collateral amounts pledged may exceed these amounts and may fluctuate in value. |
Deutsche Bank AG acts as securities lending agent and a limited purpose custodian or subcustodian to receive and disburse cash balances and cash collateral, hold short-term investments, hold collateral, and perform other custodian functions in accordance with the Agency Securities Lending and Repurchase Agreement. Securities on loan will be continuously secured by collateral which may consist of cash, U.S. Government securities, domestic and foreign short-term debt instruments, letters of credit, time deposits, repurchase agreements, money market mutual funds or other money market accounts, or such other collateral as permitted by the SEC. The value of the collateral must be at least 102% of the market value of the loaned securities that are denominated in U.S. dollars and 105% of the market value of the loaned securities that are not denominated in U.S. dollars. Upon receipt of cash collateral, Janus Capital intends to invest the cash collateral in a cash management vehicle for which Janus Capital serves as investment adviser, Janus Cash Collateral Fund LLC. Loaned securities and related collateral are marked-to-market each business day based upon the market value of the loaned securities at the close of business, employing the most recent available pricing information. Collateral levels are then adjusted based on this mark-to-market evaluation.
The Portfolio does not exchange collateral on its forward currency contracts with its counterparties; however, the Portfolio may segregate cash or high-grade securities in an amount at all times equal to or greater than the Portfolio’s commitment with respect to these contracts. Such segregated assets, if with the Portfolio’s custodian, are denoted on the accompanying Schedule of Investments and are evaluated daily to ensure their market value equals or exceeds the current market value of the Portfolio’s corresponding forward currency contracts.
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, corporate bonds, preferred stocks, and other equity securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
Securities Lending
Under procedures adopted by the Trustees, the Portfolio may seek to earn additional income by lending securities to qualified parties. Deutsche Bank AG acts as securities lending agent and a limited purpose custodian or subcustodian to receive and disburse cash balances and cash collateral, hold short-term investments, hold collateral, and perform other custodian functions. The Portfolio may lend portfolio securities in an amount equal to up to 1/3 of its total assets as determined at the time of the loan origination. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. In addition, Janus Capital makes efforts to balance the benefits and risks from granting such loans. All loans will be continuously secured by collateral which may consist of cash, U.S. Government securities, domestic and foreign short-term debt instruments, letters of credit, time deposits, repurchase agreements, money market mutual funds or other money market accounts, or such other collateral as permitted by the SEC. If the Portfolio is unable to recover a security on loan, the Portfolio may use the collateral to purchase replacement securities in the market. There is a risk that the value of the collateral could decrease below the cost of the replacement security by the time the replacement investment is made, resulting in a loss to the Portfolio.
Upon receipt of cash collateral, Janus Capital may invest it in affiliated or non-affiliated cash management vehicles, whether registered or unregistered entities, as permitted by the 1940 Act and rules promulgated thereunder. Janus Capital currently intends to invest the cash collateral in a cash management vehicle for which Janus Capital serves as investment adviser, Janus Cash Collateral Fund LLC. An investment in Janus Cash Collateral Fund LLC is generally subject to the same risks that shareholders experience when investing in similarly structured vehicles, such as the potential for significant fluctuations in assets as a result of the purchase and redemption activity of the securities lending program, a decline in the value of the collateral, and possible liquidity issues. Such risks may delay the return of the cash collateral and cause the Portfolio to violate its agreement to return the cash collateral to a borrower in a timely manner. As adviser to the Portfolio and Janus Cash Collateral Fund LLC, Janus Capital has an inherent conflict of interest as a result of its fiduciary duties to both the Portfolio and Janus Cash Collateral Fund LLC. Additionally, Janus Capital receives an investment advisory fee of 0.05% for managing Janus Cash Collateral Fund LLC, but it may not receive a fee for managing certain other affiliated cash management vehicles in which the Portfolio may invest, and
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Notes to Financial Statements
therefore may have an incentive to allocate preferred investment opportunities to investment vehicles for which it is receiving a fee.
The value of the collateral must be at least 102% of the market value of the loaned securities that are denominated in U.S. dollars and 105% of the market value of the loaned securities that are not denominated in U.S. dollars. Loaned securities and related collateral are marked-to-market each business day based upon the market value of the loaned securities at the close of business, employing the most recent available pricing information. Collateral levels are then adjusted based on this mark-to-market evaluation.
The cash collateral invested by Janus Capital is disclosed in the Schedule of Investments (if applicable). Income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the lending agent are included as “Affiliated securities lending income, net” on the Statement of Operations. As of December 31, 2016, securities lending transactions accounted for as secured borrowings with an overnight and continuous contractual maturity are $6,332,348 for equity securities. Gross amounts of recognized liabilities for securities lending (collateral received) as of December 31, 2016 is $6,464,316, resulting in the net amount due to the counterparty of $131,968.
4. Investment Advisory Agreements and Other Transactions with Affiliates
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The Portfolio’s contractual investment advisory fee rate (expressed as an annual rate) is 0.64% of its average daily net assets.
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. Effective May 1, 2016, Janus Services receives an administrative services fee at an annual rate of 0.05% of the average daily net assets of the Portfolio for arranging for the provision by participating insurance companies and qualified plan service providers of administrative services, including recordkeeping, subaccounting, order processing, or other shareholder services provided on behalf of contract holders or plan participants investing in the Portfolio. Other shareholder services may include the provision of order confirmations, periodic account statements, forwarding prospectuses, shareholder reports, and other materials to existing investors, and answering inquiries regarding accounts. Janus Services expects to use this entire fee to compensate insurance companies and qualified plan service providers for providing these services to their customers who invest in the Portfolio. Any unused portion will be reimbursed to the applicable share class at least annually.
In addition, Janus Services provides or arranges for the provision of certain other internal administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for these internal services related to the shares, except for out-of-pocket costs. These amounts are disclosed as “Other transfer agent fees and expenses” on the Statement of Operations.
Under a distribution and shareholder servicing plan (the “Plan”) adopted in accordance with Rule 12b-1 under the 1940 Act, the Service Shares may pay the Trust’s distributor, Janus Distributors LLC (“Janus Distributors”), a wholly-owned subsidiary of Janus Capital, a fee for the sale and distribution and/or shareholder servicing of the Service Shares at an annual rate of up to 0.25% of the average daily net assets of the Service Shares. Under the terms of the Plan, the Trust is authorized to make payments to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder services performed by such entities. These amounts are disclosed as “12b-1 Distribution and shareholder servicing fees” on the Statement of Operations. Payments under the Plan are not tied exclusively to actual 12b-1 distribution and servicing fees, and the payments may exceed 12b-1 distribution and servicing fees actually incurred. If any of the Portfolio’s actual 12b-1 distribution and servicing fees incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “12b-1 Distribution fees and shareholder servicing fees” in the Statement of Operations.
Janus Capital furnishes certain administration, compliance, and accounting services for the Portfolio and is reimbursed by the Portfolio for certain of its costs in providing those services (to the extent Janus Capital seeks reimbursement and such costs are not otherwise waived). In addition, employees of Janus Capital and/or its affiliates may serve as officers of the Trust. The Portfolio also pays for some or all of the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. The Portfolio pays these costs based on out-of-pocket expenses incurred by Janus Capital, and these costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services
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Notes to Financial Statements
Janus Capital provides to the Portfolio. These amounts are disclosed as “Portfolio administration fees” on the Statement of Operations. Some expenses related to compensation payable to the Portfolio's Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $56,245 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2016. The Portfolio's portion is reported as part of “Other expenses” on the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is included as of December 31, 2016 on the Statement of Assets and Liabilities in the asset, “Non-interested Trustees’ deferred compensation,” and liability, “Non-interested Trustees’ deferred compensation fees.” Additionally, the recorded unrealized appreciation/(depreciation) is included in “Unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation” on the Statement of Assets and Liabilities. Deferred compensation expenses for the year ended December 31, 2016 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $201,900 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2016.
Pursuant to the provisions of the 1940 Act and related rules, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Funds”). As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated money market funds or cash management pooled investment vehicles and the Investing Funds. Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered product compliant with Rule 2a-7 under the 1940 Act. There are no restrictions on the Portfolio's ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. The units of Janus Cash Liquidity Fund LLC are not charged any management fee, sales charge or service fee.
Any purchases and sales, realized gains/losses and recorded dividends from affiliated investments during the year ended December 31, 2016 can be found in a table located in the Notes to Schedule of Investments and Other Information.
The Portfolio is permitted to purchase or sell securities (“cross-trade”) between itself and other funds or accounts managed by Janus Capital Management LLC in accordance with Rule 17a-7 under the Investment Company Act of 1940 (“Rule 17a-7”), when the transaction is consistent with the investment objectives and policies of the Portfolio and in accordance with the Internal Cross Trade Procedures adopted by the Trust’s Board of Trustees. These procedures have been designed to ensure that any cross-trade of securities by the Portfolio from or to another fund or account that is or could be considered an affiliate of the Portfolio under certain limited circumstances by virtue of having a common investment adviser, common Officer, or common Trustee complies with Rule 17a-7. Under these procedures, each cross-trade is effected at the current market price to save costs where allowed. During the year ended December 31, 2016, the Portfolio engaged in cross trades amounting to $159,561 in purchases.
5. Federal Income Tax
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
Other book to tax differences primarily consist of deferred compensation, derivatives, and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains
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Notes to Financial Statements
and losses, if applicable. Other foreign currency gains and losses on debt instruments are treated as ordinary income for federal income tax purposes pursuant to Section 988 of the Internal Revenue Code.
Loss Deferrals | Other Book | Net Tax | |||||
Undistributed | Undistributed | Accumulated | Late-Year | Post-October | to Tax | Appreciation/ | |
$ 6,165,712 | $ 64,073,242 | $ - | $ - | $ - | $ (15,325) | $271,943,491 |
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2016 are noted below.
Unrealized appreciation and unrealized depreciation in the table below exclude appreciation/depreciation on foreign currency translations. The primary differences between book and tax appreciation or depreciation of investments are wash sale loss deferrals and investments in partnerships.
Federal Tax Cost | Unrealized | Unrealized | Net Tax Appreciation/ |
$ 615,916,045 | $283,195,788 | $(11,252,297) | $ 271,943,491 |
Income and capital gains distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferral of wash sale losses, foreign currency transactions, net investment losses, and capital loss carryovers. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to capital.
For the year ended December 31, 2016 | ||||
Distributions | ||||
From Ordinary Income | From Long-Term Capital Gains | Tax Return of Capital | Net Investment Loss | |
$ 6,166,666 | $ 60,185,388 | $ - | $ - |
For the year ended December 31, 2015 | ||||
Distributions | ||||
From Ordinary Income | From Long-Term Capital Gains | Tax Return of Capital | Net Investment Loss | |
$ 6,036,918 | $ 76,074,658 | $ - | $ - |
Permanent book to tax basis differences may result in reclassifications between the components of net assets. These differences have no impact on the results of operations or net assets. The following reclassifications have been made to the Portfolio:
Increase/(Decrease) to Capital | Increase/(Decrease) to Undistributed | Increase/(Decrease) to Undistributed | |
$ - | $ (28,351) | $ 28,351 |
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Notes to Financial Statements
6. Capital Share Transactions
Year ended December 31, 2016 | Year ended December 31, 2015 | |||||
Shares | Amount | Shares | Amount | |||
Institutional Shares: | ||||||
Shares sold | 979,051 | $ 56,320,924 | 814,112 | $49,077,557 | ||
Reinvested dividends and distributions | 632,158 | 35,205,199 | 789,910 | 47,529,145 | ||
Shares repurchased | (1,156,822) | (66,522,970) | (1,076,851) | (65,573,433) | ||
Net Increase/(Decrease) | 454,387 | $ 25,003,153 |
| 527,171 | $31,033,269 | |
Service Shares: | ||||||
Shares sold | 2,029,144 | $110,199,332 | 1,538,508 | $89,152,188 | ||
Reinvested dividends and distributions | 589,542 | 31,146,855 | 602,094 | 34,582,431 | ||
Shares repurchased | (1,041,304) | (56,834,101) | (955,872) | (55,853,548) | ||
Net Increase/(Decrease) | 1,577,382 | $ 84,512,086 |
| 1,184,730 | $67,881,071 |
7. Purchases and Sales of Investment Securities
For the year ended December 31, 2016, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of | Proceeds from Sales | Purchases of Long- | Proceeds from Sales |
$200,942,645 | $ 154,893,792 | $ - | $ - |
8. Merger Related Matters
On October 3, 2016, Janus Capital Group Inc. (“JCGI”), the direct parent of Janus Capital Management LLC, the investment adviser to the Portfolio (“Janus Capital”), and Henderson Group plc (“Henderson”) announced that they had entered into an Agreement and Plan of Merger (“Merger Agreement”) relating to the strategic combination of Henderson and JCGI (the “Transaction”). Pursuant to the Merger Agreement, a newly formed, direct wholly-owned subsidiary of Henderson will merge with and into JCGI, with JCGI as the surviving corporation and a direct wholly-owned subsidiary of Henderson. The Transaction is currently expected to close in the second quarter of 2017, subject to requisite shareholder and regulatory approvals.
The consummation of the Transaction may be deemed to be an “assignment” (as defined in the Investment Company Act of 1940, as amended) of the current advisory agreement between Janus Capital and the Portfolio. In addition, the consummation of the Transaction may be deemed to be an assignment of the current sub-advisory agreements between Janus Capital and each of INTECH Investment Management LLC (“INTECH”) and Perkins Investment Management LLC (“Perkins”), the subadvisers to certain portfolios. As a result, the consummation of the Transaction may cause such investment advisory agreements and investment sub-advisory agreements to terminate automatically in accordance with their respective terms.
On December 8, 2016, the Board of Trustees of the Portfolio (the “Board of Trustees”) approved, subject to approval of shareholders, a new investment advisory agreement between the Portfolio and Janus Capital in order to permit Janus Capital to continue to provide advisory services to the Portfolio following the closing of the Transaction. The new investment advisory agreement will have substantially similar terms as the corresponding current investment advisory agreement.
On December 8, 2016, the Board of Trustees also approved interim investment advisory agreements between the Portfolio and Janus Capital and interim sub-advisory agreements between Janus Capital and the Portfolio’s subadviser, as applicable. In the event shareholders of the Portfolio do not approve the new investment advisory agreement (and, if applicable, the new investment sub-advisory agreement) prior to the closing of the Transaction, an interim investment advisory agreement (and, if applicable, an interim investment sub-advisory agreement) will take effect with respect to the Portfolio upon the closing of the Transaction. Such interim agreements will continue in effect for a term ending on the earlier of 150 days from the closing of the Transaction, or when shareholders of the Portfolio approve the new investment advisory agreement and new investment sub-advisory agreement, if applicable. Compensation earned by Janus Capital and the Portfolio’s subadviser, if applicable, under their respective interim investment advisory agreement
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Notes to Financial Statements
or interim investment sub-advisory agreement will be held in an interest-bearing escrow account and will be paid to Janus Capital or the subadviser, as applicable, if shareholders approve the corresponding new investment advisory agreement or new investment sub-advisory agreement prior to the end of the interim period. Except for the term and escrow provisions described above, the terms of each interim investment advisory agreement and interim investment subadvisory agreement are substantially similar to those of the corresponding current investment advisory agreement or current investment sub-advisory agreement.
In addition, the Portfolio’s name will change to reflect “Janus Henderson” as part of the Portfolio’s name.
Shareholders and contract owners of record of the Portfolio as of December 29, 2016, will receive a proxy statement, notice of special meeting of shareholders, and proxy card, containing detailed information regarding shareholder proposals with respect to these and certain other matters. The shareholder meeting is expected to be held on or about April 6, 2017.
9. Subsequent Event
Management has evaluated whether any events or transactions occurred subsequent to December 31, 2016 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Janus Aspen Series and Shareholders of Janus Aspen Enterprise Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Enterprise Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and transfer agent, provide a reasonable basis for our opinion.
Denver, Colorado
February 10, 2017
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Additional Information (unaudited)
Proxy Voting Policies and Voting Record
A description of the policies and procedures that the Portfolio uses to determine how to vote proxies relating to its portfolio securities is available without charge: (i) upon request, by calling 1-800-525-0020 (toll free); (ii) on the Portfolio’s website at janus.com/proxyvoting; and (iii) on the SEC’s website at http://www.sec.gov. Additionally, information regarding the Portfolio’s proxy voting record for the most recent twelve-month period ended June 30 is also available, free of charge, through janus.com/proxyvoting and from the SEC’s website at http://www.sec.gov.
Quarterly Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of investments) with the SEC for the first and third quarters of each fiscal year on Form N-Q within 60 days of the end of such fiscal quarter. The Portfolio’s Form N-Q: (i) is available on the SEC’s website at http://www.sec.gov; (ii) may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (information on the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iii) is available without charge, upon request, by calling Janus at 1-800-525-0020 (toll free).
APPROVAL OF ADVISORY AND SUB-ADVISORY AGREEMENTS WITH JANUS CAPITAL AND JANUS CAPITAL AFFILIATES DURING THE PERIOD
On September 15, 2016, Janus Capital Group Inc. (“Janus”) advised the Trustees of Janus Investment Fund (the “Trust”), each of whom serves as an “independent” Trustee (the “Board” or the “Trustees”) of its intent to seek a strategic combination of its advisory business with Henderson Group plc (“Henderson”). The Board met with the Chief Executive Officer of Janus, who outlined the proposed combination and the potential benefits to Janus Capital Management LLC (“Janus Capital”) and each Fund of the Trust (each, a “Fund” and collectively, the “Funds”). Subsequent to the September 15, 2016 meeting, the Trustees identified a list of basic principles, which they believed should serve as the foundation for their review of the organizational, operational and strategic issues involved with any potential change in control of Janus Capital, the investment adviser to the Funds. These basic principles were communicated to Janus Capital on September 27, 2016, and were intended to be shared with Henderson. On October 3, 2016, Janus announced that it had entered into a definitive Agreement and Plan of Merger with Henderson pursuant to which Janus and Henderson agreed to effect an all-stock merger of equals strategic combination of their respective businesses, with Janus Capital surviving the merger as a direct wholly-owned subsidiary of Henderson (the “Transaction”). The Board was advised that, subject to certain conditions, the Transaction is currently expected to close during the second quarter of 2017.
As part of its due diligence, the Board developed an initial list of questions related to the proposed transaction, which was provided to Janus Capital on October 6, 2016. At a special Board meeting held on October 19, 2016, the Board considered Janus Capital’s response to the initial information request and met with the management of Janus to discuss the impact of the Transaction on the nature, extent and quality of services Janus Capital is expected to provide to the Janus Funds following the Transaction, addressing, among other matters, the personnel expected to provide such services, and the resources available to do so. After its October 19, 2016 meeting, the Board developed a supplemental request for additional information, which was provided to Janus Capital on October 26, 2016. At another special Board meeting held on November 7-8, 2016, the Board considered Janus Capital’s response to the supplemental information request and again met with the management of Janus and Henderson to discuss the impact of the Transaction on the nature, extent and quality of services Janus Capital is expected to provide to the Janus Funds following the Transaction, and also met with various officers of the Funds and of Janus Capital including various Fund portfolio managers. After its November 7-8, 2016 meeting, the Board developed a second supplemental request for additional information, which was provided to Janus Capital on November 21, 2016. On December 7-8, 2016, the Board met to consider Janus Capital’s response to the second supplemental information request and to also consider the proposed new investment advisory agreements between the Trust, on behalf of each Fund, and Janus Capital (each, a “New Advisory Agreement” and collectively, the “New Advisory Agreements”) and the new sub-advisory agreements between Janus Capital and each of the Funds that utilize INTECH Investment Management LLC (“INTECH”) or Perkins Investment Management LLC (“Perkins”) as sub-advisers (each, a “New Sub-Advisory Agreement” and collectively, the “New Sub-Advisory Agreements”) to take effect immediately after the Transaction or shareholder approval, whichever is later. During each of these meetings, the Board sought additional and clarifying information as it deemed necessary or appropriate. Throughout the process, the Board had the assistance of its independent legal counsel, who advised them on, among other things, its duties and obligations.
In connection with the Board’s review, Janus Capital provided, and the Board obtained, substantial information regarding the following matters: the management, financial position and business of Henderson; the history of Henderson’s
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Additional Information (unaudited)
business and operations; the investment performance of the investment companies advised by Henderson; the proposed structure, operations and investment processes of the combined investment management organization after the Transaction and the strategy for operating and growing the business following the Transaction; the future plans of Janus and Henderson with respect to the Funds and any proposed changes to the operations or structure of the Funds; and the future plans of Janus and Henderson with respect to the provision of services to the Funds, and the entities providing such services, including those affiliated with Janus. The Board also received information regarding the terms of the Transaction, anticipated management of the combined organization, the resources that each of Janus and Henderson bring to the combined organization and the process being followed by Janus and Henderson to integrate their organizations. The Board also received information regarding the impact of the Transaction on each of INTECH and Perkins.
In connection with the Board’s approval of New Advisory Agreements and New Sub-Advisory Agreements at its December 8, 2016 meeting, the Board also continued its on-going annual process to determine whether to continue the existing investment advisory agreements between Janus Capital and the Trust on behalf of each Fund (each, a “Current Advisory Agreement” and collectively, the “Current Advisory Agreements”) and the existing sub-advisory agreements between Janus Capital and each of the Funds that utilize INTECH or Perkins as sub-advisers (each, a “Current Sub-Advisory Agreement” and collectively, the “Current Sub-Advisory Agreements”). In this regard, the Board received and reviewed information provided by Janus and the respective Sub-Advisers in response to requests of the Board and its independent legal counsel. The Board also received and reviewed information and analysis provided by, and in response to requests of, its independent fee consultant. The Board noted that as part of this annual process, the Board had considered and was in the process of considering, numerous factors, including the nature and quality of services provided by Janus Capital and each Sub-Adviser, as applicable; investment performance, on an absolute basis and relative to appropriate peer groups and one or a combination of market indices; investment management fees, expense ratios and asset sizes of the Funds and peer groups; investment management fees charged to comparable investment companies, separate accounts and non-fund clients; Janus Capital’s profitability from managing the Funds; fall-out benefits to Janus Capital from its relationship to the Funds, including revenues derived from services provided to the Funds by affiliates of Janus Capital; and the potential benefits to Janus Capital, the Funds of receiving research services from broker/dealer firms in connection with the allocation of portfolio transactions to such firms.
In determining whether to approve the New Advisory Agreement for each Fund and the New Sub-Advisory Agreement for Funds managed by INTECH or Perkins in connection with the Transaction, and whether to recommend approval to Fund shareholders, the Board received information and made inquiries into all matters as it deemed appropriate. The Board reviewed and analyzed various factors it deemed relevant, including the following factors, among others, none of which by itself was considered dispositive:
· The terms of the New Advisory Agreements are substantially similar to the corresponding Current Advisory Agreements, and the contractual fee rate will not change. In this regard, see the discussion of the Board’s considerations with respect to its most recent approval of the Current Advisory Agreements prior to December 8, 2016, as disclosed in each Fund’s most recent prior annual or semi-annual shareholder report, as applicable.
· The terms of the New Sub-Advisory Agreements are substantially similar to the corresponding Current Sub-Advisory Agreements, and the contractual fee rate will not change. In this regard, see the discussion of the Board’s considerations with respect to its most recent approval of the Current Sub-Advisory Agreements prior to December 8, 2016, as disclosed in each Fund’s most recent prior annual or semi-annual shareholder report, as applicable.
· Janus Capital’s plans for the operation of the Funds, including its plans for the continued provision of all services currently provided to the Funds by Janus Capital and its affiliates, including, among others, investment advisory services, portfolio trading services, and Fund administrative and accounting services, and the personnel and resources proposed to support the provision of such services.
· The estimated profitability to Janus Capital from managing the Funds after the Transaction, including potential economies of scale and fall-out benefits to Janus Capital from its relationship to the Funds, including revenues derived from services provided to the Funds by affiliates of Janus Capital, and the potential benefits to Janus Capital, and the Funds of receiving research services from broker/dealer firms in connection with the allocation of portfolio transactions to such firms.
In connection with its deliberations, the Board received assurances from Janus, on behalf of itself and its affiliates (collectively, “Janus”) including the following:
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Additional Information (unaudited)
· Janus has provided to the Board such information as it believes is reasonably necessary to evaluate the New Advisory Agreements and New Sub-Advisory Agreements.
· Janus is committed to the continuance, without interruption, of services to the Funds of at least the type and quality currently provided by Janus Capital and its affiliates, or superior thereto.
· The Transaction is not expected to affect negatively the nature, extent or quality of the investment advisory services provided by Janus Capital to the Funds following the Transaction, and the investment advisory services are expected to be at least comparable to the services being provided under the Current Advisory Agreements and Current Sub-Advisory Agreements. In this regard, the Board noted specific representations that Janus does not intend for the nature, extent or quality of investment advisory and other services to be provided to the Funds following the Transaction to change, and the extent of such services were expected to increase based on the combined resources of the combined investment management organization after the Transaction, and should the nature, extent or quality of such services decline, Janus would commit the resources needed to return such services to pre-Transaction levels.
· The Funds’ current operations were expected to remain largely unchanged, except for certain fund reorganizations which will be separately considered by the Board, and such other changes as were or will be presented to the Board.
· The Transaction is not expected to result in any changes to the portfolio managers providing services to the Funds.
· After the Transaction, the distribution and marketing services provided to the Janus Funds were expected to be improved or enhanced based on the combined resources of Janus and Henderson. In this regard, Janus Capital advised the Board that after the Transaction, the extent of distribution and marketing services provided to the Janus Funds are expected to increase based on the combined resources of Janus and Henderson. This is due primarily to the anticipated increase of sales related resources and expanded global presence of the combined Janus Henderson organization, which is expected to enhance visibility and brand recognition of the Janus Henderson Funds.
· The intent of Janus Capital to take the necessary and appropriate steps to retain and attract key investment advisory personnel.
· The intent of Janus to take the necessary and appropriate steps to retain and attract key compliance, financial, fund accounting and administrative personnel supporting the management and oversight of the Funds.
· Janus is not aware of any express or implied term, condition, arrangement or understanding that would impose in its best judgement an “unfair burden” on any Fund as a result of the Transaction, as defined in Section 15(f) of the 1940 Act, and that Janus will take no action that would have the effect of imposing such an “unfair burden” on any Fund in connection with the Transaction.
Janus assured the Board that it intended to comply with Section 15(f) of the Investment Company Act of 1940, as amended. Section 15(f) provides a non-exclusive safe harbor for an investment adviser to an investment company or any of its affiliated persons to receive any amount or benefit in connection with a change in control of the investment adviser so long as two conditions are met. First, for a period of three years after the transaction, at least 75% of the board members of the investment company must not be interested persons of such investment adviser (as defined under the 1940 Act). The composition of the Board is in compliance with this provision of Section 15(f). In addition, after careful review and consideration, the Board determined that it would be in the best interests of the Funds to add to the Board an individual who currently acts as a non-interested board member of the Henderson Trust. The Board believes that this change in the Board composition will provide perspective and insight relating to experience working with the Henderson organization. The Board’s Nominating and Governance Committee considered a number of candidates and recommended that the Board nominate one proposed new trustee from those candidates who currently act as non-interested board members of the Henderson Trust. The Board approved that trustee nominee to serve on the Board, subject to election by the shareholders of the Funds and contingent on the closing of the Transaction. If the new trustee is elected and serves on the Board, the Board composition would continue to satisfy the provisions of Section 15(f).
To meet the second condition of Section 15(f), an “unfair burden” must not be imposed upon the investment company as a result of such transaction or any express or implied terms, conditions or understandings applicable thereto. The
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Additional Information (unaudited)
term “unfair burden” is defined in Section 15(f) to include any arrangement during the two-year period after the transaction, whereby the investment adviser, or any interested person of such adviser, receives or is entitled to receive any compensation, directly or indirectly, from the investment company or its shareholders (other than fees for bona fide investment advisory or other services) or from any person in connection with the purchase or sale of securities or other property to, from or on behalf of the investment company (other than bona fide ordinary compensation as principal underwriter for such investment company).
Janus represented that it does not believe that an “unfair burden” will be placed on the Funds as a result of the Transaction. In furtherance thereof, Janus has undertaken to pay the costs of preparing and distributing proxy materials to, and of holding the meetings of, the Funds’ shareholders (the “Meetings”), as well as other fees and expenses in connection with the Transaction, including the reasonable fees and expenses of legal counsel and consultants to the Funds and the Trustees. In addition, Janus has agreed, for a period of two years following the closing of the Transaction, (i) not to request any increases to advisory fees for the Funds, other than those proposed to and approved by the Board prior to the close of the Transaction, and (ii) to continue to use the current process by which expense caps are set annually for the Funds.
As a result of its review and consideration of the New Investment Advisory Agreements and New Sub-Advisory Agreements in connection with the Transaction, at a meeting on December 8, 2016, the Board voted unanimously to approve a New Investment Advisory Agreement for each Fund and a New Sub-Advisory Agreement for each Fund managed by INTECH or Perkins, and to recommend such agreements to the Funds’ shareholders for their approval.
Approval of Interim Advisory and Sub-Advisory Agreements with Janus Capital and Janus Capital Affiliates during the Period
In the event shareholders of a Fund do not approve such Fund’s New Advisory Agreement and/or New Sub-Advisory Agreement at the Meetings prior to the closing of the Transaction, Janus Capital proposed that an interim investment advisory agreement between Janus Capital and such Fund (each, an “Interim Advisory Agreement” and collectively, the “Interim Advisory Agreements”) and an interim sub-advisory agreement between Janus Capital and the applicable Sub-Adviser (each, an “Interim Sub-Advisory Agreement” and collectively, the “Interim Sub-Advisory Agreements”) take effect upon the closing of the Transaction. At the December 8, 2016 meeting, the Board, all of whom are Independent Trustees, unanimously approved an Interim Advisory Agreement for each Fund and an Interim Sub-Advisory Agreement for each applicable Fund in order to assure continuity of investment advisory services to the Funds and sub-advisory services to the sub-advised Funds after the Transaction. The terms of each Interim Advisory Agreement are substantially identical to those of the applicable Current Advisory Agreement and New Advisory Agreement, except for the term and escrow provisions described below. Similarly, the terms of each Interim Sub-Advisory Agreement are substantially identical to those of the Current Sub-Advisory Agreements and New Sub-Advisory Agreements, except for the term and escrow provisions described below. The Interim Advisory Agreement and Interim Sub-Advisory Agreement will continue in effect for a term ending on the earlier of 150 days from the closing of the Transaction (the “150-day period”) or when shareholders of the Fund approve the New Advisory Agreement and/or New Sub-Advisory Agreement. Pursuant to Rule 15a-4 under the 1940 Act, compensation earned by Janus Capital under an Interim Advisory Agreement and compensation earned by a Sub-Adviser under an Interim Sub-Advisory Agreement will be held in an interest-bearing escrow account. If shareholders of a Fund approve the New Advisory Agreement prior to the end of the 150-day period, the amount held in the escrow account under the Interim Advisory Agreement will be paid to Janus Capital. If shareholders of a Fund approve the New Advisory Agreement and New Sub-Advisory Agreement prior to the end of the 150-day period, the amount held in the escrow account under the Interim Sub-Advisory Agreement will be paid to the Sub-Adviser. If shareholders of a Fund do not approve the New Advisory Agreement prior to the end of the 150-day period, the Board will take such action as it deems to be in the best interests of the Fund, and Janus Capital will be paid the lesser of its costs incurred in performing its services under the Interim Advisory Agreement or the total amount in the escrow account, plus interest earned. If shareholders of a Fund do not approve the New Advisory Agreement and/or New Sub-Advisory Agreement prior to the end of the 150-day period, the Board will take such action as it deems to be in the best interests of the Fund, and the Sub-Adviser will be paid the lesser of its costs incurred in performing its services under the Interim Sub-Advisory Agreement or the total amount in the escrow account, plus interest earned.
Approval of an Amended and Restated Investment Advisory Agreement for Janus Portfolio
Janus Capital met with the Trustees on December 7-8, 2016, to discuss the approval of an amended and restated investment advisory agreement (the “Amended Advisory Agreement”) between Janus Capital and the Trust on behalf of
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Additional Information (unaudited)
Janus Portfolio (for the purposes of this section, the “Fund” refers to Janus Portfolio) and other matters related to the proposed changes to the Fund’s name, principal investment strategies, and portfolio management team (the “Realignment”). At the meeting, the Trustees also discussed the Amended Advisory Agreement and other matters related to the Realignment with their independent counsel in executive session. During the course of this meeting, the Trustees requested and considered such information as they deemed relevant to their deliberations. In addition, at prior meetings and during the course of this meeting the Board also considered the proposal to merge the Janus Fund, a series of Janus Investment Fund, into the Janus Research Fund, another series of Janus Investment Fund, and undertook a comprehensive process to evaluate the impact of the Transaction on the nature, quality and extent of services expected to be provided by Janus Capital to the Fund, including after the completion of the Transaction. For a fuller discussion of the Board’s consideration of the approval of a new investment advisory agreement for the Fund in connection with the Transaction, see “Approval of Advisory and Sub-Advisory Agreements with Janus and Janus Affiliates during the Period” above.
At a meeting of the Board of Trustees held on December 8, 2016, the Trustees approved the Amended Advisory Agreement and other matters related to the Realignment. In determining whether to approve the Amended Advisory Agreement, and whether to recommend approval to Fund shareholders, the Board received information and made inquiries into all matters as it deemed appropriate. The Board reviewed and analyzed various factors it deemed relevant, including the following factors, among others, none of which by itself was considered dispositive:
· the terms of the Amended Advisory Agreement are substantially the same as the Current Advisory Agreement, except for the change to the advisory fee rate based on the amount of such outperformance or underperformance (the “Full Performance Rate”) and cumulative investment record of the Fund’s benchmark index (the “Performance Fee Benchmark”);
· the estimated impact of the change to the Full Performance Rate and Performance Fee Benchmark on the amount of advisory fees to be paid by the Fund, including consideration of comparative pro forma data showing the advisory fees payable if the Amended Advisory Agreement had been in place in prior years;
· the Fund’s investment team will be able to more efficiently manage the Fund’s portfolio, assuming the merger of the Janus Fund into Janus Research Fund is implemented, which may also provide benefits from opportunities to aggregate trading across funds that have similar investment strategies;
· Janus Capital’s belief that the Fund shareholders may benefit from the Realignment, as a result of the research-driven investment process to be implemented, which includes lower historical transaction costs and potential performance gains from securities lending as compared to the Fund’s current investment approach;
· the Realignment was being proposed as part of Janus Capital’s efforts to streamline its product line;
· Janus Capital’s belief that the Fund would benefit from Janus Capital’s operational efficiencies resulting from the merger of the Janus Fund into the Janus Research Fund and the Realignment, including a potentially more efficient and effective investment management approach providing the potential for a growing fund and improved performance after the Realignment;
· the costs of seeking approval of the Amended Advisory Agreement will be borne by Janus Capital;
· the costs incurred to reposition the Fund’s portfolio in connection with the Realignment;
· the potential tax consequences of any repositioning of the Fund’s portfolio as a result of the Merger; and any potential benefits of Janus Capital and its affiliates as a result of the Realignment.
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Useful Information About Your Portfolio Report (unaudited)
The Management Commentary in this report includes valuable insight as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. A company may be allocated to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed in the Management Commentary are just that: opinions. They are a reflection based on best judgment at the time this report was compiled, which was December 31, 2016. As the investing environment changes, so could opinions. These views are unique and are not necessarily shared by fellow employees or by Janus in general.
Performance Overviews
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. When comparing the performance of the Portfolio with an index, keep in mind that market indices are not available for investment and do not reflect deduction of expenses.
Average annual total returns are quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
Schedule of Investments
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options, swaptions, and swaps follow the Portfolio’s Schedule of Investments (if applicable).
Statement of Assets and Liabilities
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
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Useful Information About Your Portfolio Report (unaudited)
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned, and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid, and expenses owed but not yet paid. Additionally, there may be other assets and liabilities such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
Statement of Operations
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
Statements of Changes in Net Assets
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors, and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
Financial Highlights
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios, and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the
Janus Aspen Series | 39 |
Janus Aspen Enterprise Portfolio
Useful Information About Your Portfolio Report (unaudited)
period. The next line reflects the total return for the period. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Do not confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the Portfolio’s yield because it does not take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager(s) and/or investment personnel. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
40 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Shareholder Meeting (unaudited)
A Special Meeting of Shareholders of the Portfolio was held on June 14, 2016. At the meeting, the following matter was voted on and approved by the Shareholders. Each whole or fractional vote reported represents one whole or fractional dollar of net asset value held on the record date for the meeting. The results of the Special Meeting of Shareholders are noted below.
Proposal
To elect eight Trustees, each of whom is considered “independent.”
Janus Aspen Series | 41 |
Janus Aspen Enterprise Portfolio
Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2016:
| |
Capital Gain Distributions | $60,185,388 |
Dividends Received Deduction Percentage | 55% |
42 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. Under the Portfolio’s Governance Procedures and Guidelines, the policy is for Trustees to retire no later than the end of the calendar year in which the Trustee turns 75. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. The Portfolio’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 58 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Except as otherwise disclosed, Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
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Janus Aspen Enterprise Portfolio
Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
William F. McCalpin | Chairman Trustee | 1/08-Present 6/02-Present | Managing Partner, Impact Investments, Athena Capital Advisors LLC (independent registered investment advisor) (since 2016) and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Chief Executive Officer, Imprint Capital (impact investment firm) (2013-2015) and Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 58 | Director of Mutual Fund Directors Forum (a non-profit organization serving independent directors of U.S. mutual funds), Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). |
44 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Alan A. Brown | Trustee | 1/13-Present | Executive Vice President, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 58 | Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of MotiveQuest LLC (strategic social market research company) (2003-2016); Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
Janus Aspen Series | 45 |
Janus Aspen Enterprise Portfolio
Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
William D. Cvengros | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 58 | Advisory Board Member, Innovate Partners Emerging |
46 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Raudline Etienne | Trustee | 6/16-Present | Senior Advisor, Albright Stonebridge Group LLC (global strategy firm) (since 2016). Formerly, Senior Vice President (2011-2015), Albright Stonebridge Group LLC; and Deputy Comptroller and Chief Investment Officer, New York State Common Retirement Fund (public pension fund) (2008-2011). | 58 | Director of Brightwood Capital Advisors, LLC (since 2014). | |
Gary A. Poliner | Trustee | 6/16-Present | Retired. Formerly, President (2010-2013) and Executive Vice President and Chief Risk Officer (2009-2012) of Northwestern Mutual Life Insurance Company. | 58 | Director of MGIC Investment Corporation (private mortgage insurance) (since 2013) and West Bend Mutual Insurance Company (property/casualty insurance) (since 2013). Formerly, Trustee of Northwestern Mutual Life Insurance Company (2010-2013); Chairman and Director of Northwestern Mutual Series Fund, Inc. (2010-2012); and Director of Frank Russell Company (global asset management firm) (2008-2013). |
Janus Aspen Series | 47 |
Janus Aspen Enterprise Portfolio
Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
James T. Rothe | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, L.P. (SBA SBIC fund focusing on private investment in public equity firms), and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004), and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 58 | Formerly, Director of Red Robin Gourmet Burgers, Inc. (RRGB) (2004-2014). | |
William D. Stewart | Trustee | 6/84-Present | Retired. Formerly, President and founder of HPS Products and Corporate Vice President of MKS Instruments, Boulder, CO (a provider of advanced process control systems for the semiconductor industry) (1976-2012). | 58 | None |
48 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Linda S. Wolf | Trustee | 11/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 58 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014) and The Field Museum of Natural History (Chicago, IL) (until 2014). |
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Janus Aspen Enterprise Portfolio
Trustees and Officers (unaudited)
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period. |
OFFICERS | |||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Principal Occupations During the Past Five Years |
Brian Demain | Executive Vice President and Co-Portfolio Manager | 11/07-Present | Vice President of Janus Capital and Portfolio Manager for other Janus accounts. |
Cody Wheaton | Executive Vice President and Co-Portfolio Manager | 7/16-Present | Portfolio Manager for other Janus accounts and Analyst for Janus Capital. |
Bruce L. Koepfgen | President and Chief Executive Officer | 7/14-Present | President of Janus Capital Group Inc. and Janus Capital Management LLC (since 2013); Executive Vice President and Director of Janus International Holding LLC (since 2011); Executive Vice President of Janus Distributors LLC (since 2011); Executive Vice President and Working Director of INTECH Investment Management LLC (since 2011); Executive Vice President and Director of Perkins Investment Management LLC (since 2011); and Executive Vice President and Director of Janus Management Holdings Corporation (since 2011). Formerly, Executive Vice President of Janus Services LLC (2011-2015), Janus Capital Group Inc. and Janus Capital Management LLC (2011-2013); and Chief Financial Officer of Janus Capital Group Inc., Janus Capital Management LLC, Janus Distributors LLC, Janus Management Holdings Corporation, and Janus Services LLC (2011-2013). |
David R. Kowalski | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. |
50 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Trustees and Officers (unaudited)
OFFICERS | |||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Principal Occupations During the Past Five Years |
Jesper Nergaard | Chief Financial Officer | 3/05-Present | Vice President of Janus Capital and Janus Services LLC. |
Kathryn L. Santoro 151 Detroit Street | Vice President, Chief Legal Counsel, and Secretary | 12/16-Present | Vice President of Janus Capital and Janus Services LLC (since 2016). Formerly, Vice President and Associate Counsel of Curian Capital, LLC and Curian Clearing LLC (2013-2016); and General Counsel and Secretary (2011-2012) and Vice President (2009-2012) of Old Mutual Capital, Inc. |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period. |
Janus Aspen Series | 51 |
Janus Aspen Enterprise Portfolio
Notes
NotesPage1
52 | DECEMBER 31, 2016 |
Janus Aspen Enterprise Portfolio
Notes
NotesPage1
Janus Aspen Series | 53 |
Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH® (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins® (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money. | ||||||||||||
Janus, INTECH and Perkins are registered trademarks of Janus International Holding LLC. © Janus International Holding LLC. Funds distributed by Janus Distributors LLC | ||||||||||||
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | |||||||||
C-0217-7529 | 109-02-81116 02-17 |
ANNUAL REPORT December 31, 2016 | |||
Janus Aspen Flexible Bond Portfolio | |||
Janus Aspen Series | |||
| |||
HIGHLIGHTS · Portfolio management perspective · Investment strategy behind your portfolio · Portfolio performance, characteristics | |||
Table of Contents
Janus Aspen Flexible Bond Portfolio
Janus Aspen Flexible Bond Portfolio (unaudited)
PERFORMANCE OVERVIEW
During the 12-month period ended December 31, 2016, Janus Aspen Flexible Bond Portfolio’s Institutional Shares and Service Shares returned 2.46% and 2.22%, respectively, compared with 2.65% for the Portfolio’s benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index.
INVESTMENT ENVIRONMENT
The year began with concerns over sluggish economic growth and the possibility of recession weighing heavily on global markets. Slower-than-expected growth in China, the implications of negative interest rates and weakness in commodities-related sectors also dragged markets down through early February. However, a more optimistic outlook was in favor by April. Risk assets, as well as rates, were rallying and crude oil prices had reset in a higher trading band. Markets hit a few road bumps in June with weak U.S. employment data bringing the health of the U.S. economy back into question, and UK voters opting to leave the European Union. Yet credit spreads quickly recovered, and U.S. Treasury yields began their upward march. Later in the period, the election of Donald Trump to the U.S. presidency added optimism around the potential for stronger economic growth and higher inflation. In December, the Federal Reserve (Fed) increased the target federal funds rate, and projected three additional hikes in 2017.
Rates rose across the U.S. Treasury yield curve, with the move most pronounced in front-end yields. After widening in February, investment-grade and high-yield corporate credit spreads tightened throughout the remainder of the year.
PERFORMANCE DISCUSSION
The Portfolio underperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, during the 12-month period. We were positioned defensively in corporate credit for much of the period, wary of a fragile U.S. economy and an abundance of shareholder friendly activity indicative of the latter stages of a credit cycle. While we continued to focus on issuers with higher quality business models and solid balance sheets throughout the year, our outlook shifted to selectively opportunistic by December’s end. An improving economic picture, recovering commodity prices, and stronger-than-expected third quarter earnings supported our view, as did steady demand for U.S. corporate credit – due to its comparatively higher yields versus other global fixed income asset classes. It is likely, in our view, that the results of the U.S. election and the associated prospects for growth have further extended the credit cycle, also contributing to our modestly improved outlook. On rates, however, we have turned defensive. An actively tightening Fed in combination with rising inflationary pressures led us to reduce duration exposure coming from Treasurys. We also diversified our duration profile with the addition of Treasury Inflation-Protected Securities (TIPS). The Portfolio’s duration ended December at 75% of the benchmark.
The leading detractor from relative results was our yield curve positioning in U.S. Treasurys. We reduced duration exposure from the asset class following the U.S. election. However, exposure to the 5- and 10-year notes, which were significantly impacted by future Fed projections, weighed on performance late in the period. A modest cash position also proved to be a detractor. Cash is not used as a strategy within the Portfolio but is a residual of our fundamental, bottom-up investment process.
Our U.S. mortgage-backed securities (MBS) contributed positively to relative performance. As rates rallied during the first half of the year, the prepayment-resistant nature of our positions proved beneficial. As rates rose over the latter part of the period, our positions were less exposed to the duration extension across the asset class. Within MBS, we focus on generic agency pass-throughs with higher coupons and less negative convexity than the positions in the index.
Janus Aspen Series | 1 |
Janus Aspen Flexible Bond Portfolio (unaudited)
Our positioning in investment-grade corporate credit was another contributor. Our overweight allocation aided relative results, as did spread carry, a measure of excess income generated by the Portfolio’s holdings. Investment-grade corporate credit was the strongest performing asset class in the index and benefited from significant spread tightening.
Relative credit sector contributors included technology, independent energy and brokerage, asset managers and exchanges. Outperformance in technology was due to spread carry, as well as our overweight allocation. Specifically, a position in Verisk Analytics supported performance in the sector. Positive sentiment surrounded Verisk Analytics upon the sale of its health care services business early in the period. The asset sale accelerated deleveraging initiatives by the data analytics firm, which was also well received by investors.
In energy, the rebound of crude oil prices, following February’s decline, benefited surviving companies – many of which have streamlined their businesses and shored up their balance sheets via asset sales. Our general overweight allocation in independent energy contributed to relative results accordingly. An overweight position in brokerage, asset managers and exchanges also benefited relative results. Heightened market volatility supported the sector in the latter half of the year, as a rallying stock market and climbing interest rates brought increased transaction volume.
Credit sector detractors were led by our holdings in electric utilities. Investor demand for U.S.-based defensive business models such as electric utilities boosted the sector during the period, and our underweight allocation dragged on relative performance. Holdings in the hard-hit pharmaceuticals sector also detracted from relative results. Political rhetoric about controlling drug prices weighed on the sector for most of the year. Midstream energy was another sector level detractor. Our security selection did not keep pace with the broader sector as it rallied with the rising price of crude oil. Specifically our position in NGL Energy Partners LP detracted from performance in the sector. The company struggled during the beginning of the year, as the drop in crude oil prices weighed significantly on energy-related companies. We exited our position, prior to the rebound in oil.
On an individual issuer basis, Royal Bank of Scotland (RBS) was the leading corporate detractor from relative results. We had owned RBS, in large part, due to the bank’s singular focus on simplifying its balance sheet. However, Brexit and associated uncertainties as well as lower interest rates in the UK have significantly affected RBS’s ability to execute on their business plan. We exited our position.
OUTLOOK
Investor sentiment has changed dramatically with the election of Mr. Trump. The pro-business initiatives his administration has proposed have already generated a more positive outlook for the U.S. economy and triggered increased growth and inflation expectations. In our view, this optimism in conjunction with a stronger dollar and relatively higher oil prices will continue to propel rates upward across the yield curve in the coming year. We anticipate a steeper curve, with the front end moving on Fed projections and the long end rising further on increased inflationary expectations. The Fed’s forecast for three interest rate hikes in 2017 is in line with our expectations, although we believe more hikes could be warranted in a reflationary environment. As a result, we will continue to actively manage duration and yield curve positioning, with the expectation of maintaining duration below that of the benchmark.
New fiscal policies for tax reform, industry deregulation and infrastructure spending, if properly implemented, should drive increased growth and inflation in the U.S., enabling the recent earnings recession to shift toward improving corporate fundamentals in 2017. Organic growth prospects and the accompanying rise in operating earnings would allow companies to grow into their capital structures, reversing the recent trend of increasing leverage. For the past two years we’ve seen accommodative monetary policy prolong the latter stages of a credit cycle, and we believe the results of the U.S. election may have just further extended the cycle. Global demand for U.S. corporate credit – due to its comparatively higher yields versus other global fixed income asset classes – also contributes to our modestly improved outlook.
Market moves in the coming year will largely be determined by the success of Mr. Trump’s policy execution, in our view, and we will closely monitor the difference between rhetoric and implementation, as well as the transition from policy intentions to growth. Our analysts are conducting in-depth, bottom-up research to identify issuers with higher quality business models and strong fundamentals, particularly in sectors that may benefit from a change in economic policy.
2 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio (unaudited)
With growth prospects on the horizon, we are taking a selectively opportunistic approach to U.S. corporate credit, yet we remain mindful of tighter spread levels after tightening in 2016. We are also closely watching the ability for corporate spreads to hold near current levels in a rising-rate environment. Our focus remains on issuers with ample liquidity, strong free-cash-flow generation potential and commitment to a sound balance sheet. In this extended cycle, the importance of security avoidance remains a central aspect of our investment process. Even as we opportunistically add to credit, we intend to maintain a conservative bias, reflecting our commitment to deliver capital preservation and strong risk-adjusted returns for our clients.
Thank you for your investment in Janus Aspen Flexible Bond Portfolio.
Janus Aspen Series | 3 |
Janus Aspen Flexible Bond Portfolio (unaudited)
Portfolio At A Glance
December 31, 2016
Portfolio Profile |
|
| |
30-day Current Yield* | Without | With | |
Institutional Shares | 2.32% | 2.32% | |
Service Shares | 2.07% | 2.07% | |
Weighted Average Maturity | 7.1 Years | ||
Average Effective Duration** | 4.4 Years | ||
* Yield will fluctuate. | |||
** A theoretical measure of price volatility. | |||
Ratings† Summary - (% of Total Investments) |
|
AAA | 0.3% |
AA | 45.6% |
A | 7.0% |
BBB | 37.6% |
BB | 5.5% |
B | 1.2% |
Not Rated | 1.3% |
Other | 1.5% |
† Credit ratings provided by Standard & Poor's (S&P), an independent credit rating agency. Credit ratings range from AAA (highest) to D (lowest) based on S&P's measures. Further information on S&P's rating methodology may be found at www.standardandpoors.com. Other rating agencies may rate the same securities differently. Ratings are relative and subjective and are not absolute standards of quality. Credit quality does not remove market risk and is subject to change. "Not Rated" securities are not rated by S&P, but may be rated by other rating agencies and do not necessarily indicate low quality. "Other" includes cash equivalents, equity securities, and certain derivative instruments. |
Asset Allocation - (% of Net Assets) | |||||
Corporate Bonds | 41.5% | ||||
Mortgage-Backed Securities | 24.3% | ||||
United States Treasury Notes/Bonds | 12.9% | ||||
U.S. Government Agency Notes | 6.5% | ||||
Asset-Backed/Commercial Mortgage-Backed Securities | 6.2% | ||||
Bank Loans and Mezzanine Loans | 5.0% | ||||
Inflation-Indexed Bonds | 1.5% | ||||
Investment Companies | 1.1% | ||||
Preferred Stocks | 1.0% | ||||
Other | (0.0)% | ||||
100.0% |
4 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio (unaudited)
Performance
See important disclosures on the next page. |
| Expense Ratios - | |||||||||
Average Annual Total Return - for the periods ended December 31, 2016 |
|
| per the May 1, 2016 prospectuses | |||||||
|
| One | Five | Ten | Since |
|
| Total Annual Fund | Net Annual Fund | |
Institutional Shares |
| 2.46% | 3.12% | 5.61% | 6.45% |
|
| 0.62% | 0.62% | |
Service Shares |
| 2.22% | 2.88% | 5.35% | 6.23% |
|
| 0.88% | 0.87% | |
Bloomberg Barclays U.S. Aggregate Bond Index |
| 2.65% | 2.23% | 4.34% | 5.29% |
|
|
|
| |
Morningstar Quartile - Institutional Shares |
| 3rd | 2nd | 1st | 1st |
|
|
|
| |
Morningstar Ranking - based on total returns for Intermediate-Term Bond Funds |
| 701/1,011 | 272/909 | 35/796 | 7/391 |
|
|
|
|
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month–end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
Net expense ratios reflect the expense waiver, if any, Janus Capital has contractually agreed to through May 1, 2017.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, portfolio holdings and other details.
Fixed income securities are subject to interest rate, inflation, credit and default risk. The bond market is volatile. As interest rates rise, bond prices usually fall, and vice versa. The return of principal is not guaranteed, and prices may decline if an issuer fails to make timely payments or its credit strength weakens.
The Portfolio will normally invest at least 80% of its net assets, measured at the time of purchase, in the type of securities described by its name.
Returns shown do not represent actual returns since they do not include insurance charges. Returns shown would have been lower had they included insurance charges.
Janus Aspen Series | 5 |
Janus Aspen Flexible Bond Portfolio (unaudited)
Performance
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
See Financial Highlights for actual expense ratios during the reporting period.
Performance for Service Shares prior to December 31, 1999 reflects the performance of Institutional Shares, adjusted to reflect the expenses of Service Shares.
Ranking is for the share class shown only; other classes may have different performance characteristics. When an expense waiver is in effect, it may have a material effect on the total return or yield, and therefore the ranking for the period.
© 2016 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio's holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Effective April 1, 2016, Michael Keough, Mayur Saigal and Darrell Watters are Co-Portfolio Managers of the Portfolio.
* The Portfolio’s inception date – September 13, 1993
6 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio (unaudited)
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; 12b-1 distribution and shareholder servicing fees (applicable to Service Shares only); transfer agent fees and expenses payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as any charges at the separate account level or contract level. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Actual | Hypothetical | |||||||||
| Beginning | Ending | Expenses |
| Beginning | Ending | Expenses | Net Annualized | ||
Institutional Shares | $1,000.00 | $980.80 | $2.99 |
| $1,000.00 | $1,022.12 | $3.05 | 0.60% | ||
Service Shares | $1,000.00 | $979.70 | $4.23 |
| $1,000.00 | $1,020.86 | $4.32 | 0.85% | ||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
Janus Aspen Series | 7 |
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Asset-Backed/Commercial Mortgage-Backed Securities – 6.2% | |||||||
AmeriCredit Automobile Receivables 2016-1, 3.5900%, 2/8/22 | $1,158,000 | $1,178,093 | |||||
AmeriCredit Automobile Receivables Trust 2012-4, 3.8200%, 2/10/20 (144A) | 448,000 | 449,567 | |||||
AmeriCredit Automobile Receivables Trust 2015-2, 3.0000%, 6/8/21 | 801,000 | 809,922 | |||||
AmeriCredit Automobile Receivables Trust 2016-2, 3.6500%, 5/9/22 | 783,000 | 797,485 | |||||
Applebee's Funding LLC / IHOP Funding LLC, 4.2770%, 9/5/44 (144A) | 2,856,000 | 2,822,756 | |||||
Aventura Mall Trust 2013-AVM, 3.7427%, 12/5/32 (144A)‡ | 859,000 | 868,882 | |||||
Banc of America Commercial Mortgage Trust 2007-3, 5.5485%, 6/10/49‡ | 672,320 | 681,242 | |||||
Capital Auto Receivables Asset Trust 2013-4, 3.8300%, 7/20/22 (144A) | 518,000 | 525,998 | |||||
CGBAM Commercial Mortgage Trust 2014-HD, 3.5382%, 2/15/31 (144A)‡ | 360,000 | 354,388 | |||||
CKE Restaurant Holdings Inc, 4.4740%, 3/20/43 (144A) | 1,684,594 | 1,662,633 | |||||
COBALT CMBS Commercial Mortgage Trust 2007-C2, 5.5680%, 4/15/47‡ | 309,142 | 309,432 | |||||
COMM 2007-C9 Mortgage Trust, 5.6500%, 12/10/49‡ | 769,000 | 782,594 | |||||
Commercial Mortgage Trust 2007-GG11, 5.8670%, 12/10/49‡ | 431,000 | 440,465 | |||||
Core Industrial Trust 2015-TEXW, 3.8487%, 2/10/34 (144A)‡ | 1,130,000 | 1,092,795 | |||||
Cosmopolitan Hotel Trust 2016-COSMO, 2.8039%, 11/15/33 (144A)‡ | 402,000 | 404,016 | |||||
Cosmopolitan Hotel Trust 2016-COSMO, 4.2039%, 11/15/33 (144A)‡ | 524,000 | 526,955 | |||||
Cosmopolitan Hotel Trust 2016-COSMO, 5.3539%, 11/15/33 (144A)‡ | 774,000 | 779,075 | |||||
Domino's Pizza Master Issuer LLC, 5.2160%, 1/25/42 (144A) | 716,442 | 730,744 | |||||
Domino's Pizza Master Issuer LLC, 3.4840%, 10/25/45 (144A) | 2,101,770 | 2,079,912 | |||||
FREMF 2010 K-SCT Mortgage Trust, 2.0000%, 1/25/20 (144A)§ | 1,361,044 | 1,259,841 | |||||
GAHR Commercial Mortgage Trust 2015-NRF, 3.3822%, 12/15/34 (144A)‡ | 531,000 | 527,750 | |||||
GS Mortgage Securities Corp II, 3.4350%, 12/10/27 (144A)‡ | 1,222,000 | 1,153,864 | |||||
GS Mortgage Securities Corp Trust 2013-NYC5, 3.6490%, 1/10/30 (144A)‡ | 558,000 | 566,962 | |||||
Hilton USA Trust 2013-HLT, 4.4534%, 11/5/30 (144A)‡ | 367,000 | 367,480 | |||||
J.P. Morgan Chase Commercial Mortgage Securities Trust 2016-WIKI, | |||||||
3.5537%, 10/5/31 (144A) | 250,000 | 251,749 | |||||
J.P. Morgan Chase Commercial Mortgage Securities Trust 2016-WIKI, | |||||||
4.0090%, 10/5/31 (144A)‡ | 383,000 | 380,719 | |||||
JP Morgan Chase Commercial Mortgage Securities Trust 2013-WT, | |||||||
2.8044%, 2/16/25 (144A) | 655,246 | 655,656 | |||||
JP Morgan Chase Commercial Mortgage Securities Trust 2013-WT, | |||||||
4.8447%, 2/16/25 (144A) | 760,000 | 759,855 | |||||
JP Morgan Chase Commercial Mortgage Securities Trust 2015-SGP, | |||||||
3.4539%, 7/15/36 (144A)‡ | 329,000 | 331,049 | |||||
JP Morgan Chase Commercial Mortgage Securities Trust 2015-SGP, | |||||||
5.2039%, 7/15/36 (144A)‡ | 1,112,000 | 1,118,945 | |||||
JP Morgan Chase Commercial Mortgage Securities Trust 2015-UES, | |||||||
3.6210%, 9/5/32 (144A)‡ | 733,000 | 708,852 | |||||
LB-UBS Commercial Mortgage Trust 2006-C1, 5.2760%, 2/15/41‡ | 564,353 | 564,381 | |||||
LB-UBS Commercial Mortgage Trust 2007-C1, 5.4840%, 2/15/40 | 764,275 | 764,943 | |||||
LB-UBS Commercial Mortgage Trust 2007-C2, 5.4930%, 2/15/40‡ | 417,000 | 420,454 | |||||
LB-UBS Commercial Mortgage Trust 2007-C7, 6.2452%, 9/15/45‡ | 616,040 | 621,121 | |||||
OSCAR US Funding Trust V, 2.7300%, 12/15/20 (144A) | 420,000 | 415,204 | |||||
OSCAR US Funding Trust V, 2.9900%, 12/15/23 (144A) | 360,000 | 352,845 | |||||
Santander Drive Auto Receivables Trust 2012-6, 2.5200%, 9/17/18 | 445,843 | 446,435 | |||||
Santander Drive Auto Receivables Trust 2013-4, 4.6700%, 1/15/20 (144A) | 1,293,000 | 1,315,344 | |||||
Santander Drive Auto Receivables Trust 2013-A, 4.7100%, 1/15/21 (144A) | 866,000 | 887,947 | |||||
Santander Drive Auto Receivables Trust 2015-1, 3.2400%, 4/15/21 | 821,000 | 830,602 | |||||
Santander Drive Auto Receivables Trust 2015-4, 3.5300%, 8/16/21 | 1,358,000 | 1,380,312 | |||||
Starwood Retail Property Trust 2014-STAR, 3.9539%, 11/15/27 (144A)‡ | 1,289,000 | 1,228,035 | |||||
Starwood Retail Property Trust 2014-STAR, 4.8539%, 11/15/27 (144A)‡ | 632,000 | 597,161 | |||||
Taco Bell Funding LLC, 3.8320%, 5/25/46 (144A) | 1,536,150 | 1,541,719 | |||||
Wachovia Bank Commercial Mortgage Trust Series 2007-C30, 5.3830%, 12/15/43 | 944,992 | 945,205 | |||||
Wachovia Bank Commercial Mortgage Trust Series 2007-C31, 5.6600%, 4/15/47‡ | 2,132,673 | 2,151,593 | |||||
Wachovia Bank Commercial Mortgage Trust Series 2007-C33, 5.9692%, 2/15/51‡ | 1,416,950 | 1,420,640 | |||||
Wachovia Bank Commercial Mortgage Trust Series 2007-C34, 5.9416%, 5/15/46‡ | 572,439 | 573,761 | |||||
Wells Fargo Commercial Mortgage Trust 2014-TISH, 3.2882%, 1/15/27 (144A)‡ | 376,000 | 366,765 | |||||
Wells Fargo Commercial Mortgage Trust 2014-TISH, 2.9540%, 2/15/27 (144A)‡ | 521,000 | 522,497 | |||||
Wells Fargo Commercial Mortgage Trust 2014-TISH, 3.7880%, 2/15/27 (144A)‡ | 154,000 | 154,025 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
8 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Asset-Backed/Commercial Mortgage-Backed Securities – (continued) | |||||||
Wendys Funding LLC 2015-1, 3.3710%, 6/15/45 (144A) | $2,557,625 | $2,553,727 | |||||
Total Asset-Backed/Commercial Mortgage-Backed Securities (cost $45,744,360) | 45,434,392 | ||||||
Bank Loans and Mezzanine Loans – 5.0% | |||||||
Basic Industry – 0.3% | |||||||
Axalta Coating Systems US Holdings Inc, 3.4982%, 2/1/23(a),‡ | 2,108,326 | 2,128,102 | |||||
Communications – 1.6% | |||||||
Charter Communications Operating LLC, 3.0200%, 7/1/20‡ | 720,401 | 723,405 | |||||
Charter Communications Operating LLC, 3.0200%, 1/3/21‡ | 947,635 | 951,321 | |||||
Charter Communications Operating LLC, 3.5000%, 1/15/24‡ | 1,997,960 | 2,008,309 | |||||
Level 3 Financing Inc, 4.0000%, 1/15/20(a),‡ | 222,000 | 224,886 | |||||
Level 3 Financing Inc, 3.5000%, 5/31/22‡ | 3,402,000 | 3,440,272 | |||||
Mission Broadcasting Inc, 0%, 9/26/23(a),‡ | 74,373 | 74,954 | |||||
Nexstar Broadcasting Inc, 0%, 9/26/23(a),‡ | 834,627 | 841,146 | |||||
Nielsen Finance LLC, 3.1542%, 10/4/23‡ | 1,862,523 | 1,881,930 | |||||
T-Mobile USA Inc, 3.5200%, 11/9/22‡ | 1,419,248 | 1,435,513 | |||||
11,581,736 | |||||||
Consumer Cyclical – 1.8% | |||||||
Aramark Services Inc, 3.3533%, 9/7/19‡ | 1,266,465 | 1,278,344 | |||||
Aramark Services Inc, 3.4982%, 2/24/21‡ | 1,738,064 | 1,752,646 | |||||
Hilton Worldwide Finance LLC, 3.5000%, 10/26/20‡ | 95,814 | 96,599 | |||||
Hilton Worldwide Finance LLC, 3.2561%, 10/25/23(a),‡ | 4,131,882 | 4,176,300 | |||||
KFC Holding Co, 3.4862%, 6/16/23‡ | 3,907,774 | 3,959,083 | |||||
Landry's Inc, 4.0000%, 10/4/23‡ | 1,960,000 | 1,977,856 | |||||
13,240,828 | |||||||
Consumer Non-Cyclical – 0.5% | |||||||
HCA Inc, 3.5200%, 2/15/24‡ | 2,194,500 | 2,219,539 | |||||
Quintiles IMS Inc, 3.5000%, 3/17/21‡ | 1,075,585 | 1,081,727 | |||||
Tumi Holdings Inc, 3.3556%, 8/1/21‡ | 719,000 | 718,403 | |||||
4,019,669 | |||||||
Technology – 0.8% | |||||||
Avago Technologies Cayman Finance Ltd, 3.7039%, 2/1/23(a),‡ | 4,499,234 | 4,561,099 | |||||
CommScope Inc, 3.2700%, 12/29/22(a),‡ | 1,410,071 | 1,422,056 | |||||
5,983,155 | |||||||
Total Bank Loans and Mezzanine Loans (cost $36,793,031) | 36,953,490 | ||||||
Corporate Bonds – 41.5% | |||||||
Asset-Backed Securities – 0.2% | |||||||
American Tower Trust #1, 1.5510%, 3/15/18 (144A) | 1,662,000 | 1,660,493 | |||||
Banking – 6.3% | |||||||
Ally Financial Inc, 3.2500%, 11/5/18 | 837,000 | 838,046 | |||||
Ally Financial Inc, 8.0000%, 12/31/18 | 322,000 | 351,383 | |||||
Bank of America Corp, 5.4200%, 3/15/17 | 400,000 | 402,898 | |||||
Bank of America Corp, 3.8750%, 3/22/17 | 328,000 | 329,856 | |||||
Bank of America Corp, 5.7000%, 5/2/17 | 1,021,000 | 1,034,899 | |||||
Bank of America Corp, 4.1830%, 11/25/27 | 3,788,000 | 3,784,625 | |||||
Bank of America Corp, 6.3000%µ | 682,000 | 712,690 | |||||
Bank of America NA, 5.3000%, 3/15/17 | 2,529,000 | 2,548,582 | |||||
Citigroup Inc, 2.3607%, 9/1/23‡ | 1,866,000 | 1,903,102 | |||||
Citizens Financial Group Inc, 3.7500%, 7/1/24 | 518,000 | 500,821 | |||||
Citizens Financial Group Inc, 4.3500%, 8/1/25 | 360,000 | 361,214 | |||||
Citizens Financial Group Inc, 4.3000%, 12/3/25 | 1,937,000 | 1,965,017 | |||||
Credit Suisse AG/New York NY, 1.3750%, 5/26/17 | 407,000 | 407,088 | |||||
Discover Financial Services, 3.9500%, 11/6/24 | 1,426,000 | 1,411,530 | |||||
Discover Financial Services, 3.7500%, 3/4/25 | 1,205,000 | 1,176,587 | |||||
Goldman Sachs Capital I, 6.3450%, 2/15/34 | 2,196,000 | 2,607,366 | |||||
Goldman Sachs Group Inc, 5.6250%, 1/15/17 | 595,000 | 595,727 | |||||
Goldman Sachs Group Inc, 3.7500%, 2/25/26 | 1,882,000 | 1,884,945 | |||||
JPMorgan Chase & Co, 2.2950%, 8/15/21 | 2,456,000 | 2,408,263 | |||||
JPMorgan Chase & Co, 3.3750%, 5/1/23 | 2,710,000 | 2,697,512 | |||||
Morgan Stanley, 5.5500%, 4/27/17 | 576,000 | 583,616 | |||||
Morgan Stanley, 2.4500%, 2/1/19 | 899,000 | 904,848 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 9 |
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Corporate Bonds – (continued) | |||||||
Banking – (continued) | |||||||
Morgan Stanley, 2.8000%, 6/16/20 | $1,356,000 | $1,366,142 | |||||
Morgan Stanley, 4.8750%, 11/1/22 | 607,000 | 649,839 | |||||
Morgan Stanley, 3.9500%, 4/23/27 | 1,344,000 | 1,328,403 | |||||
Murray Street Investment Trust I, 4.6470%, 3/9/17Ç | 2,434,000 | 2,446,681 | |||||
Santander UK PLC, 5.0000%, 11/7/23 (144A) | 2,043,000 | 2,078,393 | |||||
SVB Financial Group, 5.3750%, 9/15/20 | 1,289,000 | 1,395,654 | |||||
Synchrony Financial, 2.6000%, 1/15/19 | 64,000 | 64,302 | |||||
Synchrony Financial, 3.0000%, 8/15/19 | 1,665,000 | 1,685,847 | |||||
Synchrony Financial, 4.5000%, 7/23/25 | 2,211,000 | 2,268,205 | |||||
UBS AG, 4.7500%, 5/22/23‡ | 1,183,000 | 1,206,660 | |||||
UBS AG/Jersey, 7.2500%, 2/22/22‡ | 335,000 | 336,982 | |||||
Wells Fargo & Co, 2.1000%, 5/8/17 | 610,000 | 611,720 | |||||
Wells Fargo & Co, 3.0000%, 4/22/26 | 571,000 | 544,098 | |||||
Wells Fargo & Co, 5.8750%µ | 971,000 | 1,019,453 | |||||
46,412,994 | |||||||
Basic Industry – 0.9% | |||||||
Air Liquide Finance SA, 1.7500%, 9/27/21 (144A) | 623,000 | 598,197 | |||||
ArcelorMittal, 7.2500%, 2/25/22‡ | 123,000 | 138,683 | |||||
Ashland LLC, 3.8750%, 4/15/18 | 874,000 | 896,943 | |||||
Georgia-Pacific LLC, 3.1630%, 11/15/21 (144A) | 2,481,000 | 2,508,217 | |||||
Georgia-Pacific LLC, 3.6000%, 3/1/25 (144A) | 1,338,000 | 1,351,589 | |||||
Reliance Steel & Aluminum Co, 4.5000%, 4/15/23 | 1,320,000 | 1,326,762 | |||||
Steel Dynamics Inc, 5.0000%, 12/15/26 (144A) | 166,000 | 165,378 | |||||
6,985,769 | |||||||
Brokerage – 3.3% | |||||||
Carlyle Holdings Finance LLC, 3.8750%, 2/1/23 (144A) | 815,000 | 821,594 | |||||
Charles Schwab Corp, 3.0000%, 3/10/25 | 900,000 | 881,891 | |||||
Charles Schwab Corp, 4.6250%µ | 1,132,000 | 1,064,080 | |||||
Charles Schwab Corp, 7.0000%µ | 1,287,000 | 1,463,963 | |||||
E*TRADE Financial Corp, 5.3750%, 11/15/22 | 1,642,000 | 1,737,277 | |||||
E*TRADE Financial Corp, 4.6250%, 9/15/23 | 2,218,000 | 2,262,360 | |||||
Intercontinental Exchange Inc, 3.7500%, 12/1/25 | 1,484,000 | 1,522,367 | |||||
Lazard Group LLC, 4.2500%, 11/14/20 | 1,551,000 | 1,620,691 | |||||
Neuberger Berman Group LLC / Neuberger Berman Finance Corp, | |||||||
5.8750%, 3/15/22 (144A) | 1,922,000 | 1,986,867 | |||||
Neuberger Berman Group LLC / Neuberger Berman Finance Corp, | |||||||
4.8750%, 4/15/45 (144A) | 1,836,000 | 1,455,048 | |||||
Raymond James Financial Inc, 5.6250%, 4/1/24 | 3,649,000 | 4,058,943 | |||||
Raymond James Financial Inc, 3.6250%, 9/15/26 | 414,000 | 403,147 | |||||
Scottrade Financial Services Inc, 6.1250%, 7/11/21 (144A) | 558,000 | 630,354 | |||||
TD Ameritrade Holding Corp, 2.9500%, 4/1/22 | 1,409,000 | 1,425,111 | |||||
TD Ameritrade Holding Corp, 3.6250%, 4/1/25 | 2,680,000 | 2,717,314 | |||||
24,051,007 | |||||||
Capital Goods – 1.7% | |||||||
Arconic Inc, 5.1250%, 10/1/24 | 1,893,000 | 1,940,325 | |||||
Ball Corp, 4.3750%, 12/15/20 | 861,000 | 899,745 | |||||
CIT Group Inc, 5.0000%, 5/15/18 (144A) | 397,000 | 401,963 | |||||
CNH Industrial Capital LLC, 3.6250%, 4/15/18 | 940,000 | 951,750 | |||||
General Electric Co, 5.0000%µ | 1,686,000 | 1,749,562 | |||||
L-3 Communications Corp, 3.8500%, 12/15/26 | 297,000 | 294,781 | |||||
Martin Marietta Materials Inc, 4.2500%, 7/2/24 | 731,000 | 741,864 | |||||
Masco Corp, 3.5000%, 4/1/21 | 882,000 | 884,205 | |||||
Masco Corp, 4.3750%, 4/1/26 | 149,000 | 151,543 | |||||
Owens Corning, 4.2000%, 12/1/24 | 777,000 | 794,970 | |||||
Owens Corning, 3.4000%, 8/15/26 | 288,000 | 273,178 | |||||
Vulcan Materials Co, 7.0000%, 6/15/18 | 1,013,000 | 1,081,378 | |||||
Vulcan Materials Co, 7.5000%, 6/15/21 | 546,000 | 642,915 | |||||
Vulcan Materials Co, 4.5000%, 4/1/25 | 1,545,000 | 1,614,525 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
10 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Corporate Bonds – (continued) | |||||||
Capital Goods – (continued) | |||||||
Xylem Inc/NY, 3.2500%, 11/1/26 | $435,000 | $421,766 | |||||
12,844,470 | |||||||
Communications – 4.2% | |||||||
American Tower Corp, 3.3000%, 2/15/21 | 1,634,000 | 1,651,286 | |||||
American Tower Corp, 3.4500%, 9/15/21 | 142,000 | 143,705 | |||||
American Tower Corp, 3.5000%, 1/31/23 | 252,000 | 252,499 | |||||
American Tower Corp, 4.4000%, 2/15/26 | 894,000 | 912,319 | |||||
American Tower Corp, 3.3750%, 10/15/26 | 2,339,000 | 2,210,998 | |||||
BellSouth LLC, 4.4000%, 4/26/17 (144A) | 6,896,000 | 6,966,684 | |||||
CCO Holdings LLC / CCO Holdings Capital Corp, 5.2500%, 3/15/21 | 1,251,000 | 1,288,530 | |||||
Charter Communications Operating LLC / Charter Communications Operating Capital, 4.9080%, 7/23/25 | 2,542,000 | 2,675,757 | |||||
Comcast Corp, 2.3500%, 1/15/27 | 857,000 | 790,805 | |||||
Cox Communications Inc, 3.3500%, 9/15/26 (144A) | 1,868,000 | 1,781,168 | |||||
Crown Castle International Corp, 4.8750%, 4/15/22 | 2,470,000 | 2,630,056 | |||||
Crown Castle International Corp, 5.2500%, 1/15/23 | 1,124,000 | 1,209,705 | |||||
SBA Tower Trust, 2.9330%, 12/11/17 (144A) | 920,000 | 920,954 | |||||
Time Warner Cable LLC, 5.8500%, 5/1/17 | 1,245,000 | 1,262,639 | |||||
UBM PLC, 5.7500%, 11/3/20 (144A) | 1,456,000 | 1,529,578 | |||||
Verizon Communications Inc, 1.7500%, 8/15/21 | 566,000 | 542,454 | |||||
Verizon Communications Inc, 2.6250%, 8/15/26 | 3,444,000 | 3,165,549 | |||||
Verizon Communications Inc, 4.1250%, 8/15/46 | 718,000 | 648,492 | |||||
30,583,178 | |||||||
Consumer Cyclical – 3.7% | |||||||
1011778 BC ULC / New Red Finance Inc, 4.6250%, 1/15/22 (144A) | 1,757,000 | 1,792,140 | |||||
Brinker International Inc, 3.8750%, 5/15/23 | 2,301,000 | 2,177,321 | |||||
CVS Health Corp, 2.8000%, 7/20/20 | 3,082,000 | 3,126,569 | |||||
CVS Health Corp, 4.7500%, 12/1/22 | 684,000 | 741,985 | |||||
CVS Health Corp, 5.0000%, 12/1/24 | 919,000 | 1,004,858 | |||||
DR Horton Inc, 4.7500%, 5/15/17 | 538,000 | 542,708 | |||||
DR Horton Inc, 3.7500%, 3/1/19 | 947,000 | 965,940 | |||||
DR Horton Inc, 4.0000%, 2/15/20 | 227,000 | 233,243 | |||||
Ford Motor Co, 4.3460%, 12/8/26 | 1,079,000 | 1,088,766 | |||||
Ford Motor Credit Co LLC, 3.0000%, 6/12/17 | 286,000 | 287,660 | |||||
General Motors Co, 4.8750%, 10/2/23 | 2,589,000 | 2,711,133 | |||||
General Motors Financial Co Inc, 3.1000%, 1/15/19 | 1,418,000 | 1,432,549 | |||||
General Motors Financial Co Inc, 3.7000%, 5/9/23 | 582,000 | 572,065 | |||||
Hanesbrands Inc, 4.6250%, 5/15/24 (144A) | 2,111,000 | 2,047,670 | |||||
IHO Verwaltungs GmbH, 4.1250%, 9/15/21 (144A) | 289,000 | 291,890 | |||||
IHO Verwaltungs GmbH, 4.5000%, 9/15/23 (144A) | 206,000 | 201,365 | |||||
MDC Holdings Inc, 5.5000%, 1/15/24 | 1,055,000 | 1,089,288 | |||||
Priceline Group Inc, 3.6000%, 6/1/26 | 2,500,000 | 2,468,942 | |||||
Schaeffler Finance BV, 4.2500%, 5/15/21 (144A) | 452,000 | 461,040 | |||||
Toll Brothers Finance Corp, 4.0000%, 12/31/18 | 463,000 | 475,154 | |||||
Toll Brothers Finance Corp, 5.8750%, 2/15/22 | 377,000 | 409,045 | |||||
Toll Brothers Finance Corp, 4.3750%, 4/15/23 | 258,000 | 257,355 | |||||
Walgreens Boots Alliance Inc, 2.6000%, 6/1/21 | 438,000 | 434,865 | |||||
Walgreens Boots Alliance Inc, 3.1000%, 6/1/23 | 278,000 | 275,857 | |||||
Walgreens Boots Alliance Inc, 3.4500%, 6/1/26 | 1,130,000 | 1,107,600 | |||||
Walgreens Boots Alliance Inc, 4.6500%, 6/1/46 | 194,000 | 196,477 | |||||
ZF North America Capital Inc, 4.5000%, 4/29/22 (144A) | 477,000 | 491,906 | |||||
26,885,391 | |||||||
Consumer Non-Cyclical – 6.6% | |||||||
AbbVie Inc, 3.2000%, 5/14/26 | 2,412,000 | 2,291,501 | |||||
Actavis Funding SCS, 3.0000%, 3/12/20 | 2,132,000 | 2,160,498 | |||||
Anheuser-Busch InBev Finance Inc, 2.6500%, 2/1/21 | 477,000 | 479,188 | |||||
Anheuser-Busch InBev Finance Inc, 3.3000%, 2/1/23 | 2,720,000 | 2,765,394 | |||||
Anheuser-Busch InBev Finance Inc, 3.6500%, 2/1/26 | 4,737,000 | 4,801,561 | |||||
Anheuser-Busch InBev Finance Inc, 4.9000%, 2/1/46 | 1,615,000 | 1,734,079 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 11 |
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Corporate Bonds – (continued) | |||||||
Consumer Non-Cyclical – (continued) | |||||||
Becton Dickinson and Co, 1.8000%, 12/15/17 | $1,072,000 | $1,074,368 | |||||
Constellation Brands Inc, 4.2500%, 5/1/23 | 1,800,000 | 1,866,402 | |||||
Constellation Brands Inc, 3.7000%, 12/6/26 | 426,000 | 416,219 | |||||
Danone SA, 2.0770%, 11/2/21 (144A) | 1,970,000 | 1,911,199 | |||||
Danone SA, 2.5890%, 11/2/23 (144A) | 1,187,000 | 1,142,389 | |||||
Express Scripts Holding Co, 4.5000%, 2/25/26 | 1,225,000 | 1,259,424 | |||||
HCA Inc, 3.7500%, 3/15/19 | 680,000 | 698,700 | |||||
HCA Inc, 5.3750%, 2/1/25 | 246,000 | 246,615 | |||||
Kraft Heinz Foods Co, 2.8000%, 7/2/20 | 1,043,000 | 1,052,183 | |||||
Kraft Heinz Foods Co, 3.5000%, 7/15/22 | 894,000 | 906,560 | |||||
Kraft Heinz Foods Co, 3.0000%, 6/1/26 | 1,166,000 | 1,093,073 | |||||
Life Technologies Corp, 6.0000%, 3/1/20 | 1,140,000 | 1,241,131 | |||||
Molson Coors Brewing Co, 3.0000%, 7/15/26 | 2,400,000 | 2,265,367 | |||||
Molson Coors Brewing Co, 4.2000%, 7/15/46 | 570,000 | 530,349 | |||||
Newell Brands Inc, 3.1500%, 4/1/21 | 465,000 | 472,836 | |||||
Newell Brands Inc, 3.8500%, 4/1/23 | 399,000 | 413,456 | |||||
Newell Brands Inc, 5.0000%, 11/15/23 | 791,000 | 848,068 | |||||
Newell Brands Inc, 4.2000%, 4/1/26 | 3,146,000 | 3,279,249 | |||||
Perrigo Finance Unlimited Co, 3.9000%, 12/15/24 | 1,263,000 | 1,234,853 | |||||
Perrigo Finance Unlimited Co, 4.3750%, 3/15/26 | 511,000 | 510,821 | |||||
Shire Acquisitions Investments Ireland DAC, 2.4000%, 9/23/21 | 1,148,000 | 1,107,906 | |||||
Shire Acquisitions Investments Ireland DAC, 2.8750%, 9/23/23 | 1,969,000 | 1,869,264 | |||||
Shire Acquisitions Investments Ireland DAC, 3.2000%, 9/23/26 | 1,547,000 | 1,443,628 | |||||
Smithfield Foods Inc, 5.2500%, 8/1/18 (144A) | 106,000 | 107,193 | |||||
Sysco Corp, 2.5000%, 7/15/21 | 357,000 | 352,869 | |||||
Sysco Corp, 3.3000%, 7/15/26 | 887,000 | 869,154 | |||||
Universal Health Services Inc, 4.7500%, 8/1/22 (144A) | 1,548,000 | 1,567,350 | |||||
Universal Health Services Inc, 5.0000%, 6/1/26 (144A) | 1,236,000 | 1,205,100 | |||||
Wm Wrigley Jr Co, 2.4000%, 10/21/18 (144A) | 1,924,000 | 1,940,856 | |||||
Wm Wrigley Jr Co, 3.3750%, 10/21/20 (144A) | 1,165,000 | 1,196,676 | |||||
48,355,479 | |||||||
Electric – 1.3% | |||||||
Dominion Resources Inc/VA, 2.0000%, 8/15/21 | 205,000 | 198,618 | |||||
Dominion Resources Inc/VA, 2.8500%, 8/15/26 | 289,000 | 270,162 | |||||
Duke Energy Corp, 1.8000%, 9/1/21 | 555,000 | 534,127 | |||||
Duke Energy Corp, 2.6500%, 9/1/26 | 867,000 | 807,956 | |||||
IPALCO Enterprises Inc, 5.0000%, 5/1/18 | 643,000 | 663,898 | |||||
PPL WEM Ltd / Western Power Distribution Ltd, 5.3750%, 5/1/21 (144A) | 1,267,000 | 1,366,043 | |||||
Southern Co, 2.3500%, 7/1/21 | 2,183,000 | 2,143,494 | |||||
Southern Co, 2.9500%, 7/1/23 | 1,164,000 | 1,147,383 | |||||
Southern Co, 3.2500%, 7/1/26 | 2,562,000 | 2,489,744 | |||||
9,621,425 | |||||||
Energy – 4.3% | |||||||
Anadarko Petroleum Corp, 4.8500%, 3/15/21 | 234,000 | 250,703 | |||||
Anadarko Petroleum Corp, 5.5500%, 3/15/26 | 1,506,000 | 1,683,408 | |||||
Antero Resources Corp, 5.3750%, 11/1/21 | 1,600,000 | 1,636,000 | |||||
Buckeye Partners LP, 3.9500%, 12/1/26 | 327,000 | 318,541 | |||||
Canadian Natural Resources Ltd, 5.7000%, 5/15/17 | 318,000 | 322,726 | |||||
Canadian Natural Resources Ltd, 5.9000%, 2/1/18 | 566,000 | 589,116 | |||||
Cenovus Energy Inc, 5.7000%, 10/15/19 | 36,000 | 38,493 | |||||
Cimarex Energy Co, 5.8750%, 5/1/22 | 1,184,000 | 1,230,660 | |||||
Cimarex Energy Co, 4.3750%, 6/1/24 | 397,000 | 412,397 | |||||
ConocoPhillips Co, 4.2000%, 3/15/21 | 1,093,000 | 1,160,069 | |||||
ConocoPhillips Co, 4.9500%, 3/15/26 | 1,436,000 | 1,583,236 | |||||
Diamond Offshore Drilling Inc, 5.8750%, 5/1/19 | 278,000 | 288,356 | |||||
Energy Transfer Partners LP, 4.1500%, 10/1/20 | 704,000 | 728,505 | |||||
Energy Transfer Partners LP, 4.7500%, 1/15/26 | 737,000 | 760,947 | |||||
Helmerich & Payne International Drilling Co, 4.6500%, 3/15/25 | 2,627,000 | 2,711,127 | |||||
Hess Corp, 4.3000%, 4/1/27 | 1,293,000 | 1,285,153 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
12 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Corporate Bonds – (continued) | |||||||
Energy – (continued) | |||||||
Hiland Partners Holdings LLC / Hiland Partners Finance Corp, | |||||||
5.5000%, 5/15/22 (144A) | $800,000 | $835,280 | |||||
Kinder Morgan Energy Partners LP, 5.0000%, 10/1/21 | 657,000 | 698,937 | |||||
Kinder Morgan Energy Partners LP, 3.9500%, 9/1/22 | 758,000 | 777,435 | |||||
Kinder Morgan Inc/DE, 6.5000%, 9/15/20 | 76,000 | 85,144 | |||||
Motiva Enterprises LLC, 5.7500%, 1/15/20 (144A) | 606,000 | 654,473 | |||||
MPLX LP, 4.5000%, 7/15/23 | 360,000 | 365,259 | |||||
Oceaneering International Inc, 4.6500%, 11/15/24 | 1,671,000 | 1,646,244 | |||||
Phillips 66 Partners LP, 3.6050%, 2/15/25 | 865,000 | 846,080 | |||||
Plains All American Pipeline LP / PAA Finance Corp, 4.6500%, 10/15/25 | 1,800,000 | 1,857,258 | |||||
Regency Energy Partners LP / Regency Energy Finance Corp, 5.8750%, 3/1/22 | 1,023,000 | 1,124,328 | |||||
Sabine Pass Liquefaction LLC, 5.0000%, 3/15/27 (144A) | 1,911,000 | 1,927,721 | |||||
Spectra Energy Partners LP, 4.7500%, 3/15/24 | 1,715,000 | 1,818,763 | |||||
Tesoro Logistics LP / Tesoro Logistics Finance Corp, 5.2500%, 1/15/25 | 506,000 | 516,753 | |||||
Western Gas Partners LP, 5.3750%, 6/1/21 | 1,746,000 | 1,876,423 | |||||
Williams Cos Inc, 3.7000%, 1/15/23 | 460,000 | 443,900 | |||||
Williams Partners LP / ACMP Finance Corp, 4.8750%, 5/15/23 | 1,371,000 | 1,395,638 | |||||
Williams Partners LP / ACMP Finance Corp, 4.8750%, 3/15/24 | 126,000 | 127,127 | |||||
31,996,200 | |||||||
Finance Companies – 0.8% | |||||||
CIT Group Inc, 4.2500%, 8/15/17 | 4,458,000 | 4,513,725 | |||||
CIT Group Inc, 5.5000%, 2/15/19 (144A) | 958,000 | 1,010,690 | |||||
International Lease Finance Corp, 8.7500%, 3/15/17 | 681,000 | 690,364 | |||||
6,214,779 | |||||||
Financial Institutions – 1.1% | |||||||
Jones Lang LaSalle Inc, 4.4000%, 11/15/22 | 1,975,000 | 2,034,248 | |||||
Kennedy-Wilson Inc, 5.8750%, 4/1/24 | 2,713,000 | 2,763,869 | |||||
LeasePlan Corp NV, 2.5000%, 5/16/18 (144A) | 3,395,000 | 3,399,437 | |||||
8,197,554 | |||||||
Industrial – 0.1% | |||||||
Cintas Corp No 2, 4.3000%, 6/1/21 | 533,000 | 565,197 | |||||
Insurance – 0.9% | |||||||
Aetna Inc, 2.4000%, 6/15/21 | 1,002,000 | 996,568 | |||||
Aetna Inc, 2.8000%, 6/15/23 | 725,000 | 713,330 | |||||
Aetna Inc, 3.2000%, 6/15/26 | 3,298,000 | 3,257,797 | |||||
Berkshire Hathaway Inc, 3.1250%, 3/15/26 | 268,000 | 265,874 | |||||
CNO Financial Group Inc, 4.5000%, 5/30/20 | 400,000 | 410,000 | |||||
Voya Financial Inc, 5.6500%, 5/15/53‡ | 1,066,000 | 1,050,010 | |||||
6,693,579 | |||||||
Real Estate Investment Trusts (REITs) – 1.4% | |||||||
Alexandria Real Estate Equities Inc, 2.7500%, 1/15/20 | 396,000 | 394,842 | |||||
Alexandria Real Estate Equities Inc, 4.6000%, 4/1/22 | 2,012,000 | 2,126,529 | |||||
Alexandria Real Estate Equities Inc, 4.5000%, 7/30/29 | 907,000 | 905,932 | |||||
Goodman Funding Pty Ltd, 6.3750%, 4/15/21 (144A) | 1,838,000 | 2,073,545 | |||||
Post Apartment Homes LP, 4.7500%, 10/15/17 | 887,000 | 900,552 | |||||
Senior Housing Properties Trust, 6.7500%, 4/15/20 | 411,000 | 444,549 | |||||
Senior Housing Properties Trust, 6.7500%, 12/15/21 | 481,000 | 537,859 | |||||
SL Green Realty Corp, 5.0000%, 8/15/18 | 887,000 | 923,656 | |||||
SL Green Realty Corp, 7.7500%, 3/15/20 | 1,578,000 | 1,780,372 | |||||
10,087,836 | |||||||
Technology – 4.1% | |||||||
Cadence Design Systems Inc, 4.3750%, 10/15/24 | 2,629,000 | 2,574,769 | |||||
Fidelity National Information Services Inc, 3.6250%, 10/15/20 | 820,000 | 848,293 | |||||
Fidelity National Information Services Inc, 5.0000%, 3/15/22 | 278,000 | 285,664 | |||||
Fidelity National Information Services Inc, 4.5000%, 10/15/22 | 1,099,000 | 1,171,764 | |||||
Fidelity National Information Services Inc, 3.0000%, 8/15/26 | 1,826,000 | 1,714,592 | |||||
NXP BV / NXP Funding LLC, 4.1250%, 6/15/20 (144A) | 521,000 | 539,235 | |||||
NXP BV / NXP Funding LLC, 4.1250%, 6/1/21 (144A) | 200,000 | 206,500 | |||||
NXP BV / NXP Funding LLC, 3.8750%, 9/1/22 (144A) | 1,893,000 | 1,916,663 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 13 |
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Corporate Bonds – (continued) | |||||||
Technology – (continued) | |||||||
NXP BV / NXP Funding LLC, 4.6250%, 6/1/23 (144A) | $1,075,000 | $1,128,750 | |||||
Seagate HDD Cayman, 4.7500%, 1/1/25 | 1,736,000 | 1,653,879 | |||||
Seagate HDD Cayman, 4.8750%, 6/1/27 | 453,000 | 407,671 | |||||
Seagate HDD Cayman, 5.7500%, 12/1/34 | 394,000 | 335,885 | |||||
Total System Services Inc, 3.8000%, 4/1/21 | 868,000 | 895,169 | |||||
Total System Services Inc, 4.8000%, 4/1/26 | 3,051,000 | 3,283,117 | |||||
Trimble Inc, 4.7500%, 12/1/24 | 3,079,000 | 3,114,399 | |||||
TSMC Global Ltd, 1.6250%, 4/3/18 (144A) | 4,326,000 | 4,308,519 | |||||
Verisk Analytics Inc, 4.8750%, 1/15/19 | 812,000 | 850,954 | |||||
Verisk Analytics Inc, 5.8000%, 5/1/21 | 2,609,000 | 2,900,629 | |||||
Verisk Analytics Inc, 4.1250%, 9/12/22 | 1,012,000 | 1,053,256 | |||||
Verisk Analytics Inc, 5.5000%, 6/15/45 | 1,055,000 | 1,119,899 | |||||
30,309,607 | |||||||
Transportation – 0.6% | |||||||
Penske Truck Leasing Co Lp / PTL Finance Corp, 3.3750%, 3/15/18 (144A) | 1,747,000 | 1,777,363 | |||||
Penske Truck Leasing Co Lp / PTL Finance Corp, 2.5000%, 6/15/19 (144A) | 709,000 | 710,539 | |||||
Penske Truck Leasing Co Lp / PTL Finance Corp, 4.8750%, 7/11/22 (144A) | 113,000 | 121,136 | |||||
Penske Truck Leasing Co Lp / PTL Finance Corp, 4.2500%, 1/17/23 (144A) | 825,000 | 856,013 | |||||
Southwest Airlines Co, 5.1250%, 3/1/17 | 838,000 | 842,863 | |||||
4,307,914 | |||||||
Total Corporate Bonds (cost $304,617,894) | 305,772,872 | ||||||
Inflation-Indexed Bonds – 1.5% | |||||||
United States Treasury Inflation Indexed Bonds, 0.1250%, 7/15/26ÇÇ (cost $11,374,187) | 11,731,493 | 11,342,570 | |||||
Mortgage-Backed Securities – 24.3% | |||||||
Fannie Mae Pool: | |||||||
6.0000%, 8/1/22 | 342,925 | 366,770 | |||||
5.5000%, 1/1/25 | 116,382 | 123,780 | |||||
4.0000%, 3/1/29 | 571,979 | 606,614 | |||||
4.0000%, 6/1/29 | 208,319 | 221,068 | |||||
4.0000%, 7/1/29 | 564,480 | 595,933 | |||||
4.0000%, 9/1/29 | 631,375 | 666,821 | |||||
5.0000%, 9/1/29 | 497,535 | 542,108 | |||||
3.5000%, 10/1/29 | 2,869,218 | 3,016,145 | |||||
5.0000%, 1/1/30 | 182,116 | 198,267 | |||||
3.5000%, 5/1/33 | 452,817 | 470,088 | |||||
4.0000%, 4/1/34 | 709,438 | 753,270 | |||||
6.0000%, 10/1/35 | 454,450 | 518,165 | |||||
6.0000%, 12/1/35 | 363,191 | 415,265 | |||||
6.0000%, 2/1/37 | 180,636 | 210,711 | |||||
6.0000%, 9/1/37 | 366,172 | 391,809 | |||||
6.0000%, 10/1/38 | 390,691 | 442,654 | |||||
7.0000%, 2/1/39 | 161,325 | 194,166 | |||||
5.5000%, 12/1/39 | 687,985 | 769,509 | |||||
5.5000%, 3/1/40 | 552,939 | 628,184 | |||||
5.5000%, 4/1/40 | 1,181,103 | 1,317,121 | |||||
4.5000%, 10/1/40 | 116,126 | 125,379 | |||||
5.0000%, 10/1/40 | 168,508 | 187,011 | |||||
5.5000%, 2/1/41 | 314,306 | 357,034 | |||||
5.0000%, 5/1/41 | 259,553 | 283,919 | |||||
5.5000%, 5/1/41 | 378,432 | 422,369 | |||||
5.5000%, 6/1/41 | 832,132 | 942,451 | |||||
5.5000%, 6/1/41 | 332,194 | 370,630 | |||||
5.5000%, 7/1/41 | 1,387,019 | 1,547,637 | |||||
4.5000%, 8/1/41 | 622,412 | 672,068 | |||||
5.0000%, 10/1/41 | 320,991 | 351,155 | |||||
5.5000%, 12/1/41 | 715,815 | 800,931 | |||||
5.5000%, 2/1/42 | 3,341,177 | 3,723,433 | |||||
4.0000%, 6/1/42 | 957,485 | 1,015,071 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
14 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Mortgage-Backed Securities – (continued) | |||||||
Fannie Mae Pool – (continued) | |||||||
3.5000%, 7/1/42 | $1,809,039 | $1,864,552 | |||||
4.0000%, 7/1/42 | 571,251 | 605,457 | |||||
4.0000%, 8/1/42 | 406,799 | 431,237 | |||||
4.0000%, 9/1/42 | 523,451 | 555,014 | |||||
4.0000%, 9/1/42 | 489,445 | 519,080 | |||||
4.0000%, 11/1/42 | 634,186 | 672,642 | |||||
4.5000%, 11/1/42 | 407,862 | 441,891 | |||||
4.0000%, 12/1/42 | 238,266 | 252,406 | |||||
3.5000%, 1/1/43 | 1,200,035 | 1,236,872 | |||||
3.5000%, 2/1/43 | 2,530,258 | 2,608,081 | |||||
3.5000%, 2/1/43 | 445,195 | 458,852 | |||||
4.5000%, 2/1/43 | 2,437,854 | 2,632,699 | |||||
3.5000%, 3/1/43 | 1,320,409 | 1,361,213 | |||||
4.5000%, 3/1/43 | 926,415 | 1,023,923 | |||||
4.0000%, 5/1/43 | 1,322,835 | 1,402,607 | |||||
4.0000%, 7/1/43 | 1,792,528 | 1,900,610 | |||||
4.0000%, 8/1/43 | 1,607,278 | 1,704,410 | |||||
4.0000%, 9/1/43 | 468,246 | 496,407 | |||||
5.5000%, 10/1/43 | 1,377,129 | 1,564,775 | |||||
3.5000%, 1/1/44 | 1,871,662 | 1,931,937 | |||||
3.5000%, 1/1/44 | 733,995 | 757,526 | |||||
4.0000%, 2/1/44 | 988,699 | 1,048,663 | |||||
3.5000%, 4/1/44 | 874,818 | 901,597 | |||||
4.5000%, 5/1/44 | 4,539,398 | 4,960,141 | |||||
5.5000%, 5/1/44 | 713,674 | 796,171 | |||||
4.0000%, 6/1/44 | 1,520,239 | 1,612,305 | |||||
4.0000%, 7/1/44 | 2,691,885 | 2,859,387 | |||||
5.0000%, 7/1/44 | 1,069,414 | 1,191,761 | |||||
4.0000%, 8/1/44 | 1,508,488 | 1,602,414 | |||||
4.0000%, 8/1/44 | 571,332 | 606,936 | |||||
4.5000%, 8/1/44 | 2,039,313 | 2,225,548 | |||||
4.5000%, 10/1/44 | 1,535,168 | 1,673,213 | |||||
4.5000%, 10/1/44 | 834,557 | 905,201 | |||||
3.5000%, 2/1/45 | 2,229,693 | 2,298,340 | |||||
4.5000%, 3/1/45 | 1,454,938 | 1,578,129 | |||||
4.0000%, 5/1/45 | 1,179,514 | 1,252,330 | |||||
4.5000%, 5/1/45 | 1,380,476 | 1,504,573 | |||||
4.5000%, 5/1/45 | 847,594 | 927,148 | |||||
4.5000%, 6/1/45 | 723,280 | 790,328 | |||||
4.5000%, 9/1/45 | 3,399,531 | 3,687,655 | |||||
4.0000%, 10/1/45 | 2,237,587 | 2,368,657 | |||||
4.5000%, 10/1/45 | 2,914,185 | 3,176,276 | |||||
4.5000%, 10/1/45 | 1,484,504 | 1,636,674 | |||||
3.5000%, 12/1/45 | 748,995 | 771,488 | |||||
4.0000%, 12/1/45 | 1,039,425 | 1,103,589 | |||||
3.5000%, 1/1/46 | 2,136,607 | 2,200,374 | |||||
3.5000%, 1/1/46 | 1,830,999 | 1,885,660 | |||||
4.0000%, 1/1/46 | 853,181 | 903,656 | |||||
4.0000%, 1/1/46 | 492,524 | 521,626 | |||||
4.5000%, 2/1/46 | 2,602,359 | 2,837,563 | |||||
4.5000%, 2/1/46 | 971,878 | 1,055,701 | |||||
4.0000%, 4/1/46 | 1,348,013 | 1,432,817 | |||||
4.5000%, 4/1/46 | 1,287,594 | 1,412,198 | |||||
4.0000%, 5/1/46 | 1,625,047 | 1,721,603 | |||||
4.0000%, 6/1/46 | 508,506 | 539,517 | |||||
4.5000%, 6/1/46 | 3,249,995 | 3,529,391 | |||||
3.5000%, 7/1/46 | 1,376,645 | 1,415,860 | |||||
3.5000%, 7/1/46 | 1,364,524 | 1,405,413 | |||||
4.0000%, 7/1/46 | 1,105,524 | 1,173,259 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 15 |
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Mortgage-Backed Securities – (continued) | |||||||
Fannie Mae Pool – (continued) | |||||||
4.5000%, 7/1/46 | $895,309 | $970,986 | |||||
4.0000%, 10/1/46 | 710,556 | 752,995 | |||||
112,906,870 | |||||||
Freddie Mac Gold Pool: | |||||||
5.0000%, 6/1/20 | 135,288 | 141,427 | |||||
5.5000%, 12/1/28 | 293,042 | 324,646 | |||||
3.5000%, 7/1/29 | 553,134 | 578,139 | |||||
3.5000%, 9/1/29 | 489,065 | 511,218 | |||||
8.0000%, 4/1/32 | 205,554 | 259,587 | |||||
5.5000%, 10/1/36 | 323,654 | 367,176 | |||||
5.5000%, 4/1/40 | 614,071 | 686,938 | |||||
6.0000%, 4/1/40 | 309,263 | 360,940 | |||||
5.5000%, 5/1/41 | 495,038 | 549,080 | |||||
5.5000%, 8/1/41 | 961,978 | 1,104,479 | |||||
5.5000%, 8/1/41 | 908,075 | 1,030,894 | |||||
5.0000%, 3/1/42 | 789,274 | 877,095 | |||||
3.5000%, 2/1/44 | 954,027 | 982,208 | |||||
4.5000%, 5/1/44 | 761,340 | 826,802 | |||||
5.0000%, 7/1/44 | 272,419 | 302,147 | |||||
4.0000%, 8/1/44 | 245,835 | 260,272 | |||||
4.5000%, 9/1/44 | 2,950,761 | 3,228,392 | |||||
4.5000%, 6/1/45 | 1,521,448 | 1,664,864 | |||||
4.0000%, 2/1/46 | 1,103,652 | 1,172,140 | |||||
4.5000%, 2/1/46 | 1,424,670 | 1,559,277 | |||||
4.5000%, 2/1/46 | 926,935 | 1,005,561 | |||||
4.5000%, 5/1/46 | 1,430,694 | 1,559,672 | |||||
4.5000%, 6/1/46 | 1,742,529 | 1,890,336 | |||||
3.5000%, 7/1/46 | 2,752,503 | 2,831,104 | |||||
4.0000%, 7/1/46 | 1,465,981 | 1,549,384 | |||||
25,623,778 | |||||||
Ginnie Mae I Pool: | |||||||
4.0000%, 8/15/24 | 265,155 | 277,043 | |||||
5.1000%, 1/15/32 | 676,618 | 771,935 | |||||
7.5000%, 8/15/33 | 660,331 | 771,086 | |||||
4.9000%, 10/15/34 | 779,957 | 889,360 | |||||
5.5000%, 9/15/35 | 191,384 | 219,907 | |||||
5.5000%, 3/15/36 | 263,634 | 297,520 | |||||
5.5000%, 2/15/39 | 486,155 | 547,825 | |||||
5.5000%, 6/15/39 | 1,162,555 | 1,321,310 | |||||
5.5000%, 8/15/39 | 749,730 | 871,050 | |||||
5.5000%, 8/15/39 | 496,055 | 576,259 | |||||
5.0000%, 9/15/39 | 826,921 | 907,014 | |||||
5.0000%, 9/15/39 | 362,317 | 397,331 | |||||
5.0000%, 10/15/39 | 261,163 | 288,952 | |||||
5.0000%, 11/15/39 | 459,081 | 503,811 | |||||
5.0000%, 1/15/40 | 147,542 | 162,350 | |||||
5.0000%, 5/15/40 | 591,809 | 655,170 | |||||
5.0000%, 5/15/40 | 164,962 | 183,563 | |||||
5.0000%, 5/15/40 | 54,480 | 60,691 | |||||
5.0000%, 7/15/40 | 471,188 | 517,259 | |||||
5.0000%, 7/15/40 | 155,172 | 170,625 | |||||
4.5000%, 9/15/40 | 528,594 | 578,662 | |||||
5.0000%, 2/15/41 | 473,782 | 522,616 | |||||
5.0000%, 4/15/41 | 163,609 | 179,930 | |||||
4.5000%, 5/15/41 | 1,036,589 | 1,169,829 | |||||
4.5000%, 5/15/41 | 587,384 | 643,645 | |||||
5.0000%, 5/15/41 | 173,495 | 192,905 | |||||
4.5000%, 7/15/41 | 475,650 | 540,820 | |||||
4.5000%, 7/15/41 | 144,601 | 160,291 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
16 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Mortgage-Backed Securities – (continued) | |||||||
Ginnie Mae I Pool – (continued) | |||||||
4.5000%, 8/15/41 | $1,234,639 | $1,363,527 | |||||
5.0000%, 9/15/41 | 270,181 | 302,246 | |||||
5.0000%, 11/15/43 | 1,051,464 | 1,180,943 | |||||
4.5000%, 5/15/44 | 621,747 | 680,947 | |||||
5.0000%, 6/15/44 | 865,805 | 967,223 | |||||
5.0000%, 6/15/44 | 550,874 | 614,422 | |||||
5.0000%, 7/15/44 | 403,273 | 449,548 | |||||
4.0000%, 1/15/45 | 2,788,197 | 2,979,473 | |||||
4.0000%, 4/15/45 | 647,176 | 703,142 | |||||
4.0000%, 7/15/46 | 2,147,756 | 2,326,923 | |||||
4.5000%, 8/15/46 | 3,069,688 | 3,362,572 | |||||
29,309,725 | |||||||
Ginnie Mae II Pool: | |||||||
6.0000%, 11/20/34 | 260,923 | 304,137 | |||||
5.5000%, 3/20/35 | 1,099,875 | 1,234,646 | |||||
5.5000%, 3/20/36 | 269,347 | 300,121 | |||||
5.5000%, 11/20/37 | 288,735 | 322,634 | |||||
6.0000%, 1/20/39 | 115,186 | 129,266 | |||||
7.0000%, 5/20/39 | 57,432 | 67,531 | |||||
5.0000%, 6/20/41 | 626,077 | 680,217 | |||||
6.0000%, 12/20/41 | 213,657 | 244,317 | |||||
5.5000%, 1/20/42 | 364,991 | 406,984 | |||||
6.0000%, 1/20/42 | 127,288 | 144,867 | |||||
6.0000%, 2/20/42 | 190,556 | 215,801 | |||||
6.0000%, 3/20/42 | 121,247 | 138,239 | |||||
6.0000%, 4/20/42 | 514,298 | 590,579 | |||||
3.5000%, 5/20/42 | 376,161 | 394,026 | |||||
5.5000%, 5/20/42 | 405,457 | 449,369 | |||||
6.0000%, 5/20/42 | 341,562 | 388,234 | |||||
5.5000%, 7/20/42 | 601,346 | 659,015 | |||||
6.0000%, 7/20/42 | 136,537 | 152,944 | |||||
6.0000%, 8/20/42 | 139,385 | 159,374 | |||||
6.0000%, 9/20/42 | 153,995 | 176,238 | |||||
6.0000%, 11/20/42 | 130,787 | 149,215 | |||||
6.0000%, 2/20/43 | 172,841 | 197,469 | |||||
4.0000%, 3/20/43 | 474,330 | 511,440 | |||||
5.0000%, 12/20/44 | 915,468 | 1,030,800 | |||||
5.0000%, 9/20/45 | 340,577 | 383,858 | |||||
4.0000%, 10/20/45 | 1,283,417 | 1,383,322 | |||||
10,814,643 | |||||||
Total Mortgage-Backed Securities (cost $180,781,235) | 178,655,016 | ||||||
United States Treasury Notes/Bonds – 12.9% | |||||||
0.5000%, 4/30/17 | 297,000 | 296,980 | |||||
0.7500%, 9/30/18 | 3,965,000 | 3,937,530 | |||||
1.5000%, 10/31/19 | 7,418,000 | 7,432,480 | |||||
1.5000%, 11/30/19 | 8,680,000 | 8,693,645 | |||||
1.3750%, 9/30/20 | 1,201,000 | 1,186,509 | |||||
1.7500%, 12/31/20 | 12,825,000 | 12,810,469 | |||||
1.3750%, 1/31/21 | 10,831,000 | 10,648,974 | |||||
1.1250%, 2/28/21 | 21,486,000 | 20,888,002 | |||||
1.2500%, 3/31/21 | 11,563,000 | 11,286,147 | |||||
2.0000%, 8/15/25 | 2,070,000 | 2,002,257 | |||||
3.6250%, 2/15/44 | 5,070,000 | 5,607,719 | |||||
3.1250%, 8/15/44 | 4,271,000 | 4,313,150 | |||||
3.0000%, 11/15/44 | 2,220,000 | 2,188,090 | |||||
2.8750%, 11/15/46 | 3,818,000 | 3,677,097 | |||||
Total United States Treasury Notes/Bonds (cost $95,845,502) | 94,969,049 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 17 |
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
December 31, 2016
Shares or | Value | ||||||
Preferred Stocks – 1.0% | |||||||
Banks – 0.4% | |||||||
Citigroup Capital XIII, 7.2573% | 101,000 | $2,607,820 | |||||
Capital Markets – 0.3% | |||||||
Morgan Stanley, 6.8750% | 41,212 | 1,114,372 | |||||
Morgan Stanley, 7.1250% | 42,091 | 1,184,020 | |||||
2,298,392 | |||||||
Consumer Finance – 0.3% | |||||||
Discover Financial Services, 6.5000% | 74,000 | 1,900,320 | |||||
Industrial Conglomerates – 0% | |||||||
General Electric Co, 4.7000% | 7,000 | 171,920 | |||||
Total Preferred Stocks (cost $6,803,782) | 6,978,452 | ||||||
Investment Companies – 1.1% | |||||||
Money Markets – 1.1% | |||||||
Janus Cash Liquidity Fund LLC, 0.4708%ºº,£ (cost $8,443,000) | 8,443,000 | 8,443,000 | |||||
U.S. Government Agency Notes – 6.5% | |||||||
United States Treasury Bill: | |||||||
0%, 1/12/17◊ | $9,971,000 | 9,970,003 | |||||
0%, 3/16/17◊ | 22,123,000 | 22,115,368 | |||||
0%, 6/22/17◊ | 9,490,000 | 9,462,242 | |||||
0%, 11/9/17◊ | 6,506,000 | 6,461,362 | |||||
Total U.S. Government Agency Notes (cost $48,011,864) | 48,008,975 | ||||||
Total Investments (total cost $738,414,855) – 100.0% | 736,557,816 | ||||||
Liabilities, net of Cash, Receivables and Other Assets – (0)% | (163,528) | ||||||
Net Assets – 100% | $736,394,288 |
Summary of Investments by Country - (Long Positions) (unaudited) | |||||
% of | |||||
Investment | |||||
Country | Value | Securities | |||
United States | $693,632,765 | 94.2 | % | ||
Belgium | 9,780,222 | 1.3 | |||
Netherlands | 7,190,585 | 1.0 | |||
United Kingdom | 4,974,014 | 0.7 | |||
Singapore | 4,561,099 | 0.6 | |||
Taiwan | 4,308,519 | 0.6 | |||
France | 3,651,785 | 0.5 | |||
Canada | 2,742,475 | 0.4 | |||
Australia | 2,073,545 | 0.3 | |||
Switzerland | 1,950,730 | 0.2 | |||
Germany | 1,446,201 | 0.2 | |||
Luxembourg | 138,683 | 0.0 | |||
Hong Kong | 107,193 | 0.0 |
Total | $736,557,816 | 100.0 | % |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
18 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Notes to Schedule of Investments and Other Information
Bloomberg Barclays U.S. Aggregate Bond Index | A broad-based measure of the investment grade, US dollar-denominated, fixed-rate taxable bond market. |
LLC | Limited Liability Company |
LP | Limited Partnership |
PLC | Public Limited Company |
ULC | Unlimited Liability Company |
144A | Securities sold under Rule 144A of the Securities Act of 1933, as amended, are subject to legal and/or contractual restrictions on resale and may not be publicly sold without registration under the 1933 Act. Unless otherwise noted, these securities have been determined to be liquid under guidelines established by the Board of Trustees. The total value of 144A securities as of the year ended December 31, 2016 is $92,360,870, which represents 12.5% of net assets. |
(a) | All or a portion of this position has not settled, or is not funded. Upon settlement or funding date, interest rates for unsettled or unfunded amounts will be determined. Interest and dividends will not be accrued until time of settlement or funding. |
‡ | The interest rate on floating rate notes is based on an index or market interest rates and is subject to change. Rate in the security description is as of December 31, 2016. |
ÇÇ | Security is a U.S. Treasury Inflation-Protected Security (TIPS). |
ºº | Rate shown is the 7-day yield as of December 31, 2016. |
µ | This variable rate security is a perpetual bond. Perpetual bonds have no contractual maturity date, are not redeemable, and pay an indefinite stream of interest. The coupon rate shown represents the current interest rate. |
Ç | Step bond. The coupon rate will increase or decrease periodically based upon a predetermined schedule. The rate shown reflects the current rate. |
◊ | Zero coupon bond. |
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. The following securities were considered affiliated companies for all or some portion of the year ended December 31, 2016. Unless otherwise indicated, all information in the table is for the year ended December 31, 2016. |
Share | Share | |||||||||||||
Balance | Balance | Realized | Dividend | Value | ||||||||||
at 12/31/15 | Purchases | Sales | at 12/31/16 | Gain/(Loss) | Income | at 12/31/16 | ||||||||
Janus Cash Liquidity Fund LLC | 23,621,659 | 426,224,799 | (441,403,458) | 8,443,000 | $— | $57,416 | $8,443,000 |
§ | Schedule of Restricted and Illiquid Securities (as of December 31, 2016) | |||||||||
Value as a | ||||||||||
Acquisition | % of Net | |||||||||
Date | Cost | Value | Assets | |||||||
FREMF 2010 K-SCT Mortgage Trust, 2.0000%, 1/25/20 | 4/29/13 | $ | 1,258,219 | $ | 1,259,841 | 0.2 | % | |||
The Portfolio has registration rights for certain restricted securities held as of December 31, 2016. The issuer incurs all registration costs. |
Janus Aspen Series | 19 |
Janus Aspen Flexible Bond Portfolio
Notes to Schedule of Investments and Other Information
The following is a summary of the inputs that were used to value the Portfolio’s investments in securities and other financial instruments as of December 31, 2016. See Notes to Financial Statements for more information. | ||||||||||||
Valuation Inputs Summary | ||||||||||||
Level 2 - | Level 3 - | |||||||||||
Level 1 - | Other Significant | Significant | ||||||||||
Quotes Prices | Observable Inputs | Unobservable Inputs | ||||||||||
Assets | ||||||||||||
Investments in Securities | ||||||||||||
Asset-Backed/Commercial Mortgage-Backed Securities | $ | - | $ | 45,434,392 | $ | - | ||||||
Bank Loans and Mezzanine Loans | - | 36,953,490 | - | |||||||||
Corporate Bonds | - | 305,772,872 | - | |||||||||
Inflation-Indexed Bonds | - | 11,342,570 | - | |||||||||
Mortgage-Backed Securities | - | 178,655,016 | - | |||||||||
United States Treasury Notes/Bonds | - | 94,969,049 | - | |||||||||
Preferred Stocks | - | 6,978,452 | - | |||||||||
Investment Companies | - | 8,443,000 | - | |||||||||
U.S. Government Agency Notes | - | 48,008,975 | - | |||||||||
Total Assets | $ | - | $ | 736,557,816 | $ | - | ||||||
20 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Statement of Assets and Liabilities
December 31, 2016
|
|
|
|
|
|
|
Assets: | ||||||
Investments, at cost | $ | 738,414,855 | ||||
Unaffiliated investments, at value | 728,114,816 | |||||
Affiliated investments, at value | 8,443,000 | |||||
Cash | 188,604 | |||||
Non-interested Trustees' deferred compensation | 13,683 | |||||
Receivables: | ||||||
Interest | 4,792,226 | |||||
Investments sold | 3,679,632 | |||||
Portfolio shares sold | 858,360 | |||||
Dividends | 36,452 | |||||
Dividends from affiliates | 5,158 | |||||
Other assets | 9,372 | |||||
Total Assets |
|
| 746,141,303 |
| ||
Liabilities: | ||||||
Payables: | — | |||||
Investments purchased | 7,445,333 | |||||
Portfolio shares repurchased | 1,756,458 | |||||
Advisory fees | 326,927 | |||||
12b-1 Distribution and shareholder servicing fees | 90,956 | |||||
Transfer agent fees and expenses | 35,090 | |||||
Professional fees | 27,157 | |||||
Non-interested Trustees' deferred compensation fees | 13,683 | |||||
Portfolio administration fees | 6,331 | |||||
Non-interested Trustees' fees and expenses | 6,159 | |||||
Custodian fees | 1,066 | |||||
Accrued expenses and other payables | 37,855 | |||||
Total Liabilities |
|
| 9,747,015 |
| ||
Net Assets |
| $ | 736,394,288 |
| ||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus) | $ | 744,021,541 | ||||
Undistributed net investment income/(loss) | 2,913,562 | |||||
Undistributed net realized gain/(loss) from investments | (8,683,777) | |||||
Unrealized net appreciation/(depreciation) of investments and non-interested Trustees’ deferred compensation | (1,857,038) | |||||
Total Net Assets |
| $ | 736,394,288 |
| ||
Net Assets - Institutional Shares | $ | 335,208,045 | ||||
Shares Outstanding, $0.01 Par Value (unlimited shares authorized) | 28,842,717 | |||||
Net Asset Value Per Share |
| $ | 11.62 |
| ||
Net Assets - Service Shares | $ | 401,186,243 | ||||
Shares Outstanding, $0.01 Par Value (unlimited shares authorized) | 31,763,713 | |||||
Net Asset Value Per Share |
| $ | 12.63 |
|
See Notes to Financial Statements. | |
Janus Aspen Series | 21 |
Janus Aspen Flexible Bond Portfolio
Statement of Operations
For the year ended December 31, 2016
|
|
|
|
|
|
Investment Income: | |||||
| Interest | $ | 20,502,716 | ||
Dividends | 488,514 | ||||
Dividends from affiliates | 57,416 | ||||
Other income | 194,026 | ||||
Total Investment Income |
| 21,242,672 |
| ||
Expenses: | |||||
Advisory fees | 3,595,315 | ||||
12b-1Distribution and shareholder servicing fees: | |||||
Service Shares | 958,553 | ||||
Transfer agent administrative fees and expenses: | |||||
Institutional Shares | 117,226 | ||||
Service Shares | 136,904 | ||||
Other transfer agent fees and expenses: | |||||
Institutional Shares | 6,733 | ||||
Service Shares | 4,576 | ||||
Shareholder reports expense | 78,049 | ||||
Portfolio administration fees | 66,421 | ||||
Professional fees | 61,424 | ||||
Non-interested Trustees’ fees and expenses | 23,689 | ||||
Registration fees | 22,112 | ||||
Custodian fees | 17,983 | ||||
Other expenses | 143,927 | ||||
Total Expenses |
| 5,232,912 |
| ||
Net Investment Income/(Loss) |
| 16,009,760 |
| ||
Net Realized Gain/(Loss) on Investments: | |||||
Investments | (2,191,223) | ||||
Total Net Realized Gain/(Loss) on Investments |
| (2,191,223) |
| ||
Change in Unrealized Net Appreciation/Depreciation: | |||||
Investments and non-interested Trustees’ deferred compensation | 1,556,768 | ||||
Total Change in Unrealized Net Appreciation/Depreciation |
| 1,556,768 |
| ||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 15,375,305 |
| ||
See Notes to Financial Statements. | |
22 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Statements of Changes in Net Assets
|
|
| Year ended |
| Year ended | |||
Operations: | ||||||||
Net investment income/(loss) | $ | 16,009,760 | $ | 13,321,475 | ||||
Net realized gain/(loss) on investments | (2,191,223) | (2,224,950) | ||||||
Change in unrealized net appreciation/depreciation | 1,556,768 | (11,126,272) | ||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations |
| 15,375,305 |
|
| (29,747) | |||
Dividends and Distributions to Shareholders: | ||||||||
Dividends from Net Investment Income | ||||||||
Institutional Shares | (9,771,475) | (8,293,120) | ||||||
Service Shares | (9,601,454) | (5,184,329) | ||||||
| Total Dividends from Net Investment Income |
| (19,372,929) |
|
| (13,477,449) | ||
Distributions from Net Realized Gain from Investment Transactions | ||||||||
Institutional Shares | — | (1,662,607) | ||||||
Service Shares | — | (1,012,843) | ||||||
| Total Distributions from Net Realized Gain from Investment Transactions | — |
|
| (2,675,450) | |||
Net Decrease from Dividends and Distributions to Shareholders |
| (19,372,929) |
|
| (16,152,899) | |||
Capital Share Transactions: | ||||||||
Institutional Shares | (19,540,667) | 762,616 | ||||||
Service Shares | 100,490,572 | 103,035,167 | ||||||
Net Increase/(Decrease) from Capital Share Transactions |
| 80,949,905 |
|
| 103,797,783 | |||
Net Increase/(Decrease) in Net Assets |
| 76,952,281 |
|
| 87,615,137 | |||
Net Assets: | ||||||||
Beginning of period | 659,442,007 | 571,826,870 | ||||||
| End of period | $ | 736,394,288 |
| $ | 659,442,007 | ||
Undistributed Net Investment Income/(Loss) | $ | 2,913,562 |
| $ | 4,020,003 |
See Notes to Financial Statements. | |
Janus Aspen Series | 23 |
Janus Aspen Flexible Bond Portfolio
Financial Highlights
Institutional Shares | ||||||||||||||||||
For a share outstanding during each year ended December 31 |
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
| |||
Net Asset Value, Beginning of Period |
| $11.67 |
|
| $11.98 |
|
| $11.82 |
|
| $12.59 |
|
| $12.27 |
| |||
Income/(Loss) from Investment Operations: | ||||||||||||||||||
Net investment income/(loss) | 0.28(1) | 0.28(1) | 0.33(1) | 0.38 | 0.43 | |||||||||||||
Net realized and unrealized gain/(loss) | 0.01(2) | (0.25) | 0.25 | (0.40) | 0.57 | |||||||||||||
Total from Investment Operations |
| 0.29 |
|
| 0.03 |
|
| 0.58 |
|
| (0.02) |
|
| 1.00 |
| |||
Less Dividends and Distributions: | ||||||||||||||||||
Dividends (from net investment income) | (0.34) | (0.28) | (0.42) | (0.30) | (0.44) | |||||||||||||
Distributions (from capital gains) | — | (0.06) | — | (0.45) | (0.24) | |||||||||||||
Total Dividends and Distributions |
| (0.34) |
|
| (0.34) |
|
| (0.42) |
|
| (0.75) |
|
| (0.68) |
| |||
Net Asset Value, End of Period | $11.62 | $11.67 | $11.98 | $11.82 | $12.59 | |||||||||||||
Total Return* |
| 2.46% |
|
| 0.22% |
|
| 4.94% |
|
| (0.06)% |
|
| 8.34% |
| |||
Net Assets, End of Period (in thousands) | $335,208 | $355,569 | $363,977 | $344,028 | $381,593 | |||||||||||||
Average Net Assets for the Period (in thousands) | $350,120 | $347,338 | $345,064 | $360,706 | $378,140 | |||||||||||||
Ratios to Average Net Assets**: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Ratio of Gross Expenses | 0.58% | 0.57% | 0.59% | 0.56% | 0.57% | |||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) | 0.58% | 0.57% | 0.58% | 0.55% | 0.55% | |||||||||||||
Ratio of Net Investment Income/(Loss) | 2.31% | 2.33% | 2.74% | 2.35% | 2.87% | |||||||||||||
Portfolio Turnover Rate | 112% | 111% | 144% | 138% | 140% | |||||||||||||
1 |
Service Shares | ||||||||||||||||||
For a share outstanding during each year ended December 31 |
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
| |||
Net Asset Value, Beginning of Period |
| $12.66 |
|
| $12.98 |
|
| $12.78 |
|
| $13.56 |
|
| $13.17 |
| |||
Income/(Loss) from Investment Operations: | ||||||||||||||||||
Net investment income/(loss) | 0.27(1) | 0.27(1) | 0.32(1) | 0.38 | 0.40 | |||||||||||||
Net realized and unrealized gain/(loss) | 0.01(2) | (0.27) | 0.28 | (0.44) | 0.65 | |||||||||||||
Total from Investment Operations |
| 0.28 |
|
| — |
|
| 0.60 |
|
| (0.06) |
|
| 1.05 |
| |||
Less Dividends and Distributions: | ||||||||||||||||||
Dividends (from net investment income) | (0.31) | (0.26) | (0.40) | (0.27) | (0.42) | |||||||||||||
Distributions (from capital gains) | — | (0.06) | — | (0.45) | (0.24) | |||||||||||||
Total Dividends and Distributions |
| (0.31) |
|
| (0.32) |
|
| (0.40) |
|
| (0.72) |
|
| (0.66) |
| |||
Net Asset Value, End of Period | $12.63 | $12.66 | $12.98 | $12.78 | $13.56 | |||||||||||||
Total Return* |
| 2.22% |
|
| (0.06)% |
|
| 4.69% |
|
| (0.32)% |
|
| 8.09% |
| |||
Net Assets, End of Period (in thousands) | $401,186 | $303,873 | $207,850 | $117,539 | $128,665 | |||||||||||||
Average Net Assets for the Period (in thousands) | $383,710 | $250,537 | $146,672 | $124,401 | $109,071 | |||||||||||||
Ratios to Average Net Assets**: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Ratio of Gross Expenses | 0.83% | 0.82% | 0.85% | 0.81% | 0.82% | |||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) | 0.83% | 0.82% | 0.84% | 0.80% | 0.80% | |||||||||||||
Ratio of Net Investment Income/(Loss) | 2.06% | 2.09% | 2.49% | 2.10% | 2.60% | |||||||||||||
Portfolio Turnover Rate | 112% | 111% | 144% | 138% | 140% | |||||||||||||
* Total return not annualized for periods of less than one full year. ** Annualized for periods of less than one full year. (1) Per share amounts are calculated based on average shares outstanding during the year or period. (2) This amount does not agree with the change in the aggregate gains and losses in the Portfolio's securities for the year or period due to the timing of sales and repurchases of the Portfolio's shares in relation to fluctuating market values for the Portfolio's securities. |
See Notes to Financial Statements. | |
24 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Janus Aspen Flexible Bond Portfolio (the “Portfolio”) is a series fund. The Portfolio is part of Janus Aspen Series (the “Trust”), which is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and therefore has applied the specialized accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. The Trust offers twelve portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio seeks to obtain maximum total return, consistent with preservation of capital. The Portfolio is classified as diversified, as defined in the 1940 Act.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Each class represents an interest in the same portfolio of investments. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
Shareholders, including other portfolios, participating insurance companies, as well as accounts, may from time to time own (beneficially or of record) a significant percentage of the Portfolio’s Shares and can be considered to “control” the Portfolio when that ownership exceeds 25% of the Portfolio’s assets (and which may differ from control as determined in accordance with accounting principles generally accepted in the United States of America).
The following accounting policies have been followed by the Portfolio and are in conformity with accounting principles generally accepted in the United States of America.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is no current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). The Portfolio will determine the market value of individual securities held by it by using prices provided by one or more approved professional pricing services or, as needed, by obtaining market quotations from independent broker-dealers. Most debt securities are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Certain short-term securities maturing within 60 days or less may be evaluated and valued on an amortized cost basis provided that the amortized cost determined approximates market value. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. Special valuation considerations may apply with respect to “odd-lot” fixed-income transactions which, due to their small size, may receive evaluated prices by pricing services which reflect a large block trade and not what actually could be obtained for the odd-lot position. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Valuation Inputs Summary
FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements regarding fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that
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Janus Aspen Flexible Bond Portfolio
Notes to Financial Statements
market participants would use in pricing an asset or liability and establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. These inputs are summarized into three broad levels:
Level 1 – Unadjusted quoted prices in active markets the Portfolio has the ability to access for identical assets or liabilities.
Level 2 – Observable inputs other than unadjusted quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Assets or liabilities categorized as Level 2 in the hierarchy generally include: debt securities fair valued in accordance with the evaluated bid or ask prices supplied by a pricing service; securities traded on OTC markets and listed securities for which no sales are reported that are fair valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees; certain short-term debt securities with maturities of 60 days or less that are fair valued at amortized cost; and equity securities of foreign issuers whose fair value is determined by using systematic fair valuation models provided by independent third parties in order to adjust for stale pricing which may occur between the close of certain foreign exchanges and the close of the NYSE. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, swaps, investments in unregistered investment companies, options, and forward contracts.
Level 3 – Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the Portfolio’s own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for fair valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2016 to fair value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
There were no transfers between Level 1, Level 2 and Level 3 of the fair value hierarchy during the year. The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Portfolio is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
26 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Notes to Financial Statements
Indemnifications
In the normal course of business, the Portfolio may enter into contracts that contain provisions for indemnification of other parties against certain potential liabilities. The Portfolio’s maximum exposure under these arrangements is unknown, and would involve future claims that may be made against the Portfolio that have not yet occurred. Currently, the risk of material loss from such claims is considered remote.
Dividends and Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
2. Other Investments and Strategies
Additional Investment Risk
The Portfolio may be invested in lower-rated debt securities that have a higher risk of default or loss of value since these securities may be sensitive to economic changes, political changes, or adverse developments specific to the issuer.
The financial crisis in both the U.S. and global economies over the past several years has resulted, and may continue to result, in a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks, took steps to support the financial markets. The withdrawal of this support, a failure of measures put in place to respond to the crisis, or investor perception that such efforts were not sufficient could each negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries continue to impact many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. As a result, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) provided for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expanded federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act remain pending and will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced, and may continue to experience, severe economic and financial difficulties. In particular, many EU nations are susceptible to economic risks associated with high levels of debt, notably due to investments in sovereign debt of countries such as Greece, Italy, Spain, Portugal, and Ireland. Many non-governmental issuers, and even certain governments, have defaulted on, or been forced to restructure, their debts. Many other issuers have faced difficulties obtaining credit or refinancing existing obligations. Financial institutions have in many cases required government or central bank support, have needed to raise capital,
Janus Aspen Series | 27 |
Janus Aspen Flexible Bond Portfolio
Notes to Financial Statements
and/or have been impaired in their ability to extend credit. As a result, financial markets in the EU experienced extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world. Greece, Ireland, and Portugal have already received one or more "bailouts" from other Eurozone member states, and it is unclear how much additional funding they will require or if additional Eurozone member states will require bailouts in the future. The risk of investing in securities in the European markets may also be heightened due to the referendum in which the United Kingdom voted to exit the EU (known as “Brexit”). One or more other countries may also abandon the euro and/or withdraw from the EU, placing its currency and banking system in jeopardy.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Inflation-Linked Securities
The Portfolio may invest in inflation-indexed bonds, including municipal inflation-indexed bonds and corporate inflation-indexed bonds, or in derivatives that are linked to these securities. Inflation-linked bonds are fixed-income securities that have a principal value that is periodically adjusted according to the rate of inflation. If an index measuring inflation falls, the principal value of inflation-indexed bonds will typically be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Because of their inflation adjustment feature, inflation-linked bonds typically have lower yields than conventional fixed-rate bonds. In addition, inflation-linked bonds also normally decline in price when real interest rates rise. In the event of deflation, when prices decline over time, the principal and income of inflation-linked bonds would likely decline, resulting in losses to the Portfolio.
In the case of Treasury Inflation-Protected Securities, also known as TIPS, repayment of original bond principal upon maturity (as adjusted for inflation) is guaranteed by the U.S. Treasury. For inflation-linked bonds that do not provide a similar guarantee, the adjusted principal value of the inflation-linked bond repaid at maturity may be less than the original principal. Other non-U.S. sovereign governments also issue inflation-linked securities (sometimes referred to as “linkers”) that are tied to their own local consumer price indices. In certain of these non-U.S. jurisdictions, the repayment of the original bond principal upon the maturity of an inflation-linked bond is not guaranteed, allowing for the amount of the bond repaid at maturity to be less than par. Inflation-linked bonds may also be issued by, or related to, sovereign governments of other developed countries, emerging market countries, or companies or other entities not affiliated with governments.
Loans
The Portfolio may invest in various commercial loans, including bank loans, bridge loans, debtor-in-possession (“DIP”) loans, mezzanine loans, and other fixed and floating rate loans. These loans may be acquired through loan participations and assignments or on a when-issued basis. Commercial loans will comprise no more than 20% of the Portfolio’s total assets. Below are descriptions of the types of loans held by the Portfolio as of December 31, 2016.
· Bank Loans - Bank loans are obligations of companies or other entities entered into in connection with recapitalizations, acquisitions, and refinancings. The Portfolio’s investments in bank loans are generally acquired as a participation interest in, or assignment of, loans originated by a lender or other financial institution. These investments may include institutionally-traded floating and fixed-rate debt securities.
· Floating Rate Loans – Floating rate loans are debt securities that have floating interest rates, that adjust periodically, and are tied to a benchmark lending rate, such as London Interbank Offered Rate (“LIBOR”). In other cases, the lending rate could be tied to the prime rate offered by one or more major U.S. banks or the rate paid on large certificates of deposit traded in the secondary markets. If the benchmark lending rate changes, the rate payable to lenders under the loan will change at the next scheduled adjustment date
28 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Notes to Financial Statements
specified in the loan agreement. Floating rate loans are typically issued to companies (‘‘borrowers’’) in connection with recapitalizations, acquisitions, and refinancings. Floating rate loan investments are generally below investment grade. Senior floating rate loans are secured by specific collateral of a borrower and are senior in the borrower’s capital structure. The senior position in the borrower’s capital structure generally gives holders of senior loans a claim on certain of the borrower’s assets that is senior to subordinated debt and preferred and common stock in the case of a borrower’s default. Floating rate loan investments may involve foreign borrowers, and investments may be denominated in foreign currencies. Floating rate loans often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged. The Portfolio may invest in obligations of borrowers who are in bankruptcy proceedings. While the Portfolio generally expects to invest in fully funded term loans, certain of the loans in which the Portfolio may invest include revolving loans, bridge loans, and delayed draw term loans.
Purchasers of floating rate loans may pay and/or receive certain fees. The Portfolio may receive fees such as covenant waiver fees or prepayment penalty fees. The Portfolio may pay fees such as facility fees. Such fees may affect the Portfolio’s return.
· Mezzanine Loans - Mezzanine loans are secured by the stock of the company that owns the assets. Mezzanine loans are a hybrid of debt and equity financing that is typically used to fund the expansion of existing companies. A mezzanine loan is composed of debt capital that gives the lender the right to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. Mezzanine loans typically are the most subordinated debt obligation in an issuer’s capital structure.
Mortgage- and Asset-Backed Securities
Mortgage- and asset-backed securities represent interests in “pools” of commercial or residential mortgages or other assets, including consumer loans or receivables. The Portfolio may purchase fixed or variable rate commercial or residential mortgage-backed securities issued by the Government National Mortgage Association (“Ginnie Mae”), the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or other governmental or government-related entities. Ginnie Mae’s guarantees are backed by the full faith and credit of the U.S. Government, which means that the U.S. Government guarantees that the interest and principal will be paid when due. Fannie Mae and Freddie Mac securities are not backed by the full faith and credit of the U.S. Government. In September 2008, the Federal Housing Finance Agency (“FHFA”), an agency of the U.S. Government, placed Fannie Mae and Freddie Mac under conservatorship. Since that time, Fannie Mae and Freddie Mac have received capital support through U.S. Treasury preferred stock purchases, and Treasury and Federal Reserve purchases of their mortgage-backed securities. The FHFA and the U.S. Treasury have imposed strict limits on the size of these entities’ mortgage portfolios. The FHFA has the power to cancel any contract entered into by Fannie Mae and Freddie Mac prior to FHFA’s appointment as conservator or receiver, including the guarantee obligations of Fannie Mae and Freddie Mac.
The Portfolio may also purchase other mortgage- and asset-backed securities through single- and multi-seller conduits, collateralized debt obligations, structured investment vehicles, and other similar securities. Asset-backed securities may be backed by various consumer obligations, including automobile loans, equipment leases, credit card receivables, or other collateral. In the event the underlying loans are not paid, the securities’ issuer could be forced to sell the assets and recognize losses on such assets, which could impact your return. Unlike traditional debt instruments, payments on these securities include both interest and a partial payment of principal. Mortgage and asset-backed securities are subject to both extension risk, where borrowers pay off their debt obligations more slowly in times of rising interest rates, and prepayment risk, where borrowers pay off their debt obligations sooner than expected in times of declining interest rates. These risks may reduce the Portfolio’s returns. In addition, investments in mortgage- and asset backed securities, including those comprised of subprime mortgages, may be subject to a higher degree of credit risk, valuation risk, and liquidity risk than various other types of fixed-income securities. Additionally, although mortgage-backed securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that guarantors or insurers will meet their obligations.
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, corporate bonds, preferred stocks, and other equity securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real
Janus Aspen Series | 29 |
Janus Aspen Flexible Bond Portfolio
Notes to Financial Statements
estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
Restricted Security Transactions
Restricted securities held by the Portfolio may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933, as amended. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of the Portfolio to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist.
Sovereign Debt
The Portfolio may invest in U.S. and foreign government debt securities (“sovereign debt”). Investments in U.S. sovereign debt are considered low risk. However, investments in non-U.S. sovereign debt can involve a high degree of risk, including the risk that the governmental entity that controls the repayment of sovereign debt may not be willing or able to repay the principal and/or to pay the interest on its sovereign debt in a timely manner. A sovereign debtor’s willingness or ability to satisfy its debt obligation may be affected by various factors, including its cash flow situation, the extent of its foreign currency reserves, the availability of foreign exchange when a payment is due, the relative size of its debt position in relation to its economy as a whole, the sovereign debtor’s policy toward international lenders, and local political constraints to which the governmental entity may be subject. Sovereign debtors may also be dependent on expected disbursements from foreign governments, multilateral agencies, and other entities. The failure of a sovereign debtor to implement economic reforms, achieve specified levels of economic performance, or repay principal or interest when due may result in the cancellation of third party commitments to lend funds to the sovereign debtor, which may further impair such debtor’s ability or willingness to timely service its debts. The Portfolio may be requested to participate in the rescheduling of such sovereign debt and to extend further loans to governmental entities, which may adversely affect the Portfolio’s holdings. In the event of default, there may be limited or no legal remedies for collecting sovereign debt and there may be no bankruptcy proceedings through which the Portfolio may collect all or part of the sovereign debt that a governmental entity has not repaid.
When-Issued and Delayed Delivery Securities
The Portfolio may purchase or sell securities on a when-issued or delayed delivery basis. When-issued and delayed delivery securities in which the Portfolio may invest include U.S. Treasury Securities, municipal bonds, bank loans, and other similar instruments. The price of the underlying securities and date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Losses may arise due to changes in the market value of the securities or from the inability of counterparties to meet the terms of the contract. In connection with such purchases, the Portfolio may hold liquid assets as collateral with the Portfolio’s custodian sufficient to cover the purchase price.
3. Investment Advisory Agreements and Other Transactions with Affiliates
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s contractual investment advisory fee rate (expressed as an annual rate).
Average Daily Net Assets of the Portfolio | Contractual Investment Advisory Fee (%) |
First $300 Million | 0.55 |
Over $300 Million | 0.45 |
Janus Capital has contractually agreed to waive the advisory fee payable by the Portfolio or reimburse expenses in an amount equal to the amount, if any, that the Portfolio’s normal operating expenses including the investment advisory fee, but excluding the 12b-1 distribution and shareholder servicing fees (applicable to Service Shares), transfer agent fees and expenses payable pursuant to the Transfer Agency Agreement, brokerage commissions, interest, dividends, taxes, acquired fund fees and expenses, and extraordinary expenses, exceed the annual rate of 0.57% of the Portfolio’s average daily net assets. Janus Capital has agreed to continue the waiver until at least May 1, 2017. If applicable, amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations.
30 | DECEMBER 31, 2016 |
Janus Aspen Flexible Bond Portfolio
Notes to Financial Statements
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. Effective May 1, 2016, Janus Services receives an administrative services fee at an annual rate of 0.05% of the average daily net assets of the Portfolio for arranging for the provision by participating insurance companies and qualified plan service providers of administrative services, including recordkeeping, subaccounting, order processing, or other shareholder services provided on behalf of contract holders or plan participants investing in the Portfolio. Other shareholder services may include the provision of order confirmations, periodic account statements, forwarding prospectuses, shareholder reports, and other materials to existing investors, and answering inquiries regarding accounts. Janus Services expects to use this entire fee to compensate insurance companies and qualified plan service providers for providing these services to their customers who invest in the Portfolio. Any unused portion will be reimbursed to the applicable share class at least annually.
In addition, Janus Services provides or arranges for the provision of certain other internal administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for these internal services related to the shares, except for out-of-pocket costs. These amounts are disclosed as “Other transfer agent fees and expenses” on the Statement of Operations.
Under a distribution and shareholder servicing plan (the “Plan”) adopted in accordance with Rule 12b-1 under the 1940 Act, the Service Shares may pay the Trust’s distributor, Janus Distributors LLC (“Janus Distributors”), a wholly-owned subsidiary of Janus Capital, a fee for the sale and distribution and/or shareholder servicing of the Service Shares at an annual rate of up to 0.25% of the average daily net assets of the Service Shares. Under the terms of the Plan, the Trust is authorized to make payments to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder services performed by such entities. These amounts are disclosed as “12b-1 Distribution and shareholder servicing fees” on the Statement of Operations. Payments under the Plan are not tied exclusively to actual 12b-1 distribution and servicing fees, and the payments may exceed 12b-1 distribution and servicing fees actually incurred. If any of the Portfolio’s actual 12b-1 distribution and servicing fees incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “12b-1 Distribution fees and shareholder servicing fees” in the Statement of Operations.
Janus Capital furnishes certain administration, compliance, and accounting services for the Portfolio and is reimbursed by the Portfolio for certain of its costs in providing those services (to the extent Janus Capital seeks reimbursement and such costs are not otherwise waived). In addition, employees of Janus Capital and/or its affiliates may serve as officers of the Trust. The Portfolio also pays for some or all of the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. The Portfolio pays these costs based on out-of-pocket expenses incurred by Janus Capital, and these costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital provides to the Portfolio. These amounts are disclosed as “Portfolio administration fees” on the Statement of Operations. Some expenses related to compensation payable to the Portfolio's Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $56,245 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2016. The Portfolio's portion is reported as part of “Other expenses” on the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is included as of December 31, 2016 on the Statement of Assets and Liabilities in the asset, “Non-interested Trustees’ deferred compensation,” and liability, “Non-interested Trustees’ deferred compensation fees.” Additionally, the recorded unrealized appreciation/(depreciation) is included in “Unrealized net appreciation/(depreciation) of investments and non-interested Trustees’ deferred compensation” on the Statement of Assets and Liabilities. Deferred compensation expenses for the year ended December 31, 2016 are included in “Non-interested Trustees’ fees and expenses��� on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be
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deferred until distributed in accordance with the Deferred Plan. Deferred fees of $201,900 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2016.
Pursuant to the provisions of the 1940 Act and related rules, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Funds”). As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated money market funds or cash management pooled investment vehicles and the Investing Funds. Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered product compliant with Rule 2a-7 under the 1940 Act. There are no restrictions on the Portfolio's ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. The units of Janus Cash Liquidity Fund LLC are not charged any management fee, sales charge or service fee.
Any purchases and sales, realized gains/losses and recorded dividends from affiliated investments during the year ended December 31, 2016 can be found in a table located in the Notes to Schedule of Investments and Other Information.
The Portfolio is permitted to purchase or sell securities (“cross-trade”) between itself and other funds or accounts managed by Janus Capital Management LLC in accordance with Rule 17a-7 under the Investment Company Act of 1940 (“Rule 17a-7”), when the transaction is consistent with the investment objectives and policies of the Portfolio and in accordance with the Internal Cross Trade Procedures adopted by the Trust’s Board of Trustees. These procedures have been designed to ensure that any cross-trade of securities by the Portfolio from or to another fund or account that is or could be considered an affiliate of the Portfolio under certain limited circumstances by virtue of having a common investment adviser, common Officer, or common Trustee complies with Rule 17a-7. Under these procedures, each cross-trade is effected at the current market price to save costs where allowed. During the year ended December 31, 2016, the Portfolio engaged in cross trades amounting to $57,376,089 in purchases and $37,076,496 in sales, resulting in a net realized gain of $428,265. The net realized gain is included within the “Net Realized Gain/(Loss) on Investments” section of the Portfolio’s Statement of Operations.
4. Federal Income Tax
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
Other book to tax differences primarily consist of deferred compensation. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses, if applicable. Other foreign currency gains and losses on debt instruments are treated as ordinary income for federal income tax purposes pursuant to Section 988 of the Internal Revenue Code.
Loss Deferrals | Other Book | Net Tax | |||||
Undistributed | Undistributed | Accumulated | Late-Year | Post-October | to Tax | Appreciation/ | |
$ 2,927,243 | $ - | $ (8,052,382) | $ - | $ - | $ (13,680) | $ (2,488,434) |
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Notes to Financial Statements
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2016, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows these capital loss carryovers.
Capital Loss Carryover Schedule | ||||
For the year ended December 31, 2016 | ||||
No Expiration | ||||
Short-Term | Long-Term | Accumulated | ||
$(8,049,725) | $ (2,657) | $ (8,052,382) |
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2016 are noted below.
Unrealized appreciation and unrealized depreciation in the table below exclude appreciation/depreciation on foreign currency translations. The primary differences between book and tax appreciation or depreciation of investments are wash sale loss deferrals and investments in partnerships.
Federal Tax Cost | Unrealized | Unrealized | Net Tax Appreciation/ |
$ 739,046,250 | $ 6,072,858 | $ (8,561,292) | $ (2,488,434) |
Income and capital gains distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferral of wash sale losses, net investment losses, and capital loss carryovers. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to capital.
For the year ended December 31, 2016 | ||||
Distributions | ||||
From Ordinary Income | From Long-Term Capital Gains | Tax Return of Capital | Net Investment Loss | |
$ 19,372,929 | $ - | $ - | $ - |
For the year ended December 31, 2015 | ||||
Distributions | ||||
From Ordinary Income | From Long-Term Capital Gains | Tax Return of Capital | Net Investment Loss | |
$ 13,477,370 | $ 2,675,529 | $ - | $ - |
Permanent book to tax basis differences may result in reclassifications between the components of net assets. These differences have no impact on the results of operations or net assets. The following reclassifications have been made to the Portfolio:
Increase/(Decrease) to Capital | Increase/(Decrease) to Undistributed | Increase/(Decrease) to Undistributed | |
$ - | $ 2,256,728 | $ (2,256,728) |
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5. Capital Share Transactions
Year ended December 31, 2016 | Year ended December 31, 2015 | |||||
Shares | Amount | Shares | Amount | |||
Institutional Shares: | ||||||
Shares sold | 4,343,672 | $ 51,810,237 | 9,346,283 | $112,663,618 | ||
Reinvested dividends and distributions | 830,664 | 9,771,475 | 842,906 | 9,955,727 | ||
Shares repurchased | (6,802,949) | (81,122,379) | (10,095,656) | (121,856,729) | ||
Net Increase/(Decrease) | (1,628,613) | $ (19,540,667) |
| 93,533 | $ 762,616 | |
Service Shares: | ||||||
Shares sold | 14,435,323 | $186,652,808 | 14,834,525 | $192,168,046 | ||
Reinvested dividends and distributions | 751,582 | 9,601,454 | 483,987 | 6,197,172 | ||
Shares repurchased | (7,428,588) | (95,763,690) | (7,330,112) | (95,330,051) | ||
Net Increase/(Decrease) | 7,758,317 | $100,490,572 |
| 7,988,400 | $103,035,167 |
6. Purchases and Sales of Investment Securities
For the year ended December 31, 2016, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of | Proceeds from Sales | Purchases of Long- | Proceeds from Sales |
$442,060,988 | $ 357,897,327 | $ 398,541,122 | $ 440,042,960 |
7. Merger Related Matters
On October 3, 2016, Janus Capital Group Inc. (“JCGI”), the direct parent of Janus Capital Management LLC, the investment adviser to the Portfolio (“Janus Capital”), and Henderson Group plc (“Henderson”) announced that they had entered into an Agreement and Plan of Merger (“Merger Agreement”) relating to the strategic combination of Henderson and JCGI (the “Transaction”). Pursuant to the Merger Agreement, a newly formed, direct wholly-owned subsidiary of Henderson will merge with and into JCGI, with JCGI as the surviving corporation and a direct wholly-owned subsidiary of Henderson. The Transaction is currently expected to close in the second quarter of 2017, subject to requisite shareholder and regulatory approvals.
The consummation of the Transaction may be deemed to be an “assignment” (as defined in the Investment Company Act of 1940, as amended) of the current advisory agreement between Janus Capital and the Portfolio. In addition, the consummation of the Transaction may be deemed to be an assignment of the current sub-advisory agreements between Janus Capital and each of INTECH Investment Management LLC (“INTECH”) and Perkins Investment Management LLC (“Perkins”), the subadvisers to certain portfolios. As a result, the consummation of the Transaction may cause such investment advisory agreements and investment sub-advisory agreements to terminate automatically in accordance with their respective terms.
On December 8, 2016, the Board of Trustees of the Portfolio (the “Board of Trustees”) approved, subject to approval of shareholders, a new investment advisory agreement between the Portfolio and Janus Capital in order to permit Janus Capital to continue to provide advisory services to the Portfolio following the closing of the Transaction. The new investment advisory agreement will have substantially similar terms as the corresponding current investment advisory agreement.
On December 8, 2016, the Board of Trustees also approved interim investment advisory agreements between the Portfolio and Janus Capital and interim sub-advisory agreements between Janus Capital and the Portfolio’s subadviser, as applicable. In the event shareholders of the Portfolio do not approve the new investment advisory agreement (and, if applicable, the new investment sub-advisory agreement) prior to the closing of the Transaction, an interim investment advisory agreement (and, if applicable, an interim investment sub-advisory agreement) will take effect with respect to the Portfolio upon the closing of the Transaction. Such interim agreements will continue in effect for a term ending on the earlier of 150 days from the closing of the Transaction, or when shareholders of the Portfolio approve the new investment advisory agreement and new investment sub-advisory agreement, if applicable. Compensation earned by
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Notes to Financial Statements
Janus Capital and the Portfolio’s subadviser, if applicable, under their respective interim investment advisory agreement or interim investment sub-advisory agreement will be held in an interest-bearing escrow account and will be paid to Janus Capital or the subadviser, as applicable, if shareholders approve the corresponding new investment advisory agreement or new investment sub-advisory agreement prior to the end of the interim period. Except for the term and escrow provisions described above, the terms of each interim investment advisory agreement and interim investment subadvisory agreement are substantially similar to those of the corresponding current investment advisory agreement or current investment sub-advisory agreement.
In addition, the Portfolio’s name will change to reflect “Janus Henderson” as part of the Portfolio’s name.
Shareholders and contract owners of record of the Portfolio as of December 29, 2016, will receive a proxy statement, notice of special meeting of shareholders, and proxy card, containing detailed information regarding shareholder proposals with respect to these and certain other matters. The shareholder meeting is expected to be held on or about April 6, 2017.
8. Subsequent Event
Management has evaluated whether any events or transactions occurred subsequent to December 31, 2016 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Janus Aspen Series and Shareholders of Janus Aspen Flexible Bond Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Flexible Bond Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian, brokers and transfer agent, provide a reasonable basis for our opinion.
Denver, Colorado
February 10, 2017
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Additional Information (unaudited)
Proxy Voting Policies and Voting Record
A description of the policies and procedures that the Portfolio uses to determine how to vote proxies relating to its portfolio securities is available without charge: (i) upon request, by calling 1-800-525-0020 (toll free); (ii) on the Portfolio’s website at janus.com/proxyvoting; and (iii) on the SEC’s website at http://www.sec.gov. Additionally, information regarding the Portfolio’s proxy voting record for the most recent twelve-month period ended June 30 is also available, free of charge, through janus.com/proxyvoting and from the SEC’s website at http://www.sec.gov.
Quarterly Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of investments) with the SEC for the first and third quarters of each fiscal year on Form N-Q within 60 days of the end of such fiscal quarter. The Portfolio’s Form N-Q: (i) is available on the SEC’s website at http://www.sec.gov; (ii) may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (information on the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iii) is available without charge, upon request, by calling Janus at 1-800-525-0020 (toll free).
APPROVAL OF ADVISORY AND SUB-ADVISORY AGREEMENTS WITH JANUS CAPITAL AND JANUS CAPITAL AFFILIATES DURING THE PERIOD
On September 15, 2016, Janus Capital Group Inc. (“Janus”) advised the Trustees of Janus Investment Fund (the “Trust”), each of whom serves as an “independent” Trustee (the “Board” or the “Trustees”) of its intent to seek a strategic combination of its advisory business with Henderson Group plc (“Henderson”). The Board met with the Chief Executive Officer of Janus, who outlined the proposed combination and the potential benefits to Janus Capital Management LLC (“Janus Capital”) and each Fund of the Trust (each, a “Fund” and collectively, the “Funds”). Subsequent to the September 15, 2016 meeting, the Trustees identified a list of basic principles, which they believed should serve as the foundation for their review of the organizational, operational and strategic issues involved with any potential change in control of Janus Capital, the investment adviser to the Funds. These basic principles were communicated to Janus Capital on September 27, 2016, and were intended to be shared with Henderson. On October 3, 2016, Janus announced that it had entered into a definitive Agreement and Plan of Merger with Henderson pursuant to which Janus and Henderson agreed to effect an all-stock merger of equals strategic combination of their respective businesses, with Janus Capital surviving the merger as a direct wholly-owned subsidiary of Henderson (the “Transaction”). The Board was advised that, subject to certain conditions, the Transaction is currently expected to close during the second quarter of 2017.
As part of its due diligence, the Board developed an initial list of questions related to the proposed transaction, which was provided to Janus Capital on October 6, 2016. At a special Board meeting held on October 19, 2016, the Board considered Janus Capital’s response to the initial information request and met with the management of Janus to discuss the impact of the Transaction on the nature, extent and quality of services Janus Capital is expected to provide to the Janus Funds following the Transaction, addressing, among other matters, the personnel expected to provide such services, and the resources available to do so. After its October 19, 2016 meeting, the Board developed a supplemental request for additional information, which was provided to Janus Capital on October 26, 2016. At another special Board meeting held on November 7-8, 2016, the Board considered Janus Capital’s response to the supplemental information request and again met with the management of Janus and Henderson to discuss the impact of the Transaction on the nature, extent and quality of services Janus Capital is expected to provide to the Janus Funds following the Transaction, and also met with various officers of the Funds and of Janus Capital including various Fund portfolio managers. After its November 7-8, 2016 meeting, the Board developed a second supplemental request for additional information, which was provided to Janus Capital on November 21, 2016. On December 7-8, 2016, the Board met to consider Janus Capital’s response to the second supplemental information request and to also consider the proposed new investment advisory agreements between the Trust, on behalf of each Fund, and Janus Capital (each, a “New Advisory Agreement” and collectively, the “New Advisory Agreements”) and the new sub-advisory agreements between Janus Capital and each of the Funds that utilize INTECH Investment Management LLC (“INTECH”) or Perkins Investment Management LLC (“Perkins”) as sub-advisers (each, a “New Sub-Advisory Agreement” and collectively, the “New Sub-Advisory Agreements”) to take effect immediately after the Transaction or shareholder approval, whichever is later. During each of these meetings, the Board sought additional and clarifying information as it deemed necessary or appropriate. Throughout the process, the Board had the assistance of its independent legal counsel, who advised them on, among other things, its duties and obligations.
In connection with the Board’s review, Janus Capital provided, and the Board obtained, substantial information regarding the following matters: the management, financial position and business of Henderson; the history of Henderson’s
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Additional Information (unaudited)
business and operations; the investment performance of the investment companies advised by Henderson; the proposed structure, operations and investment processes of the combined investment management organization after the Transaction and the strategy for operating and growing the business following the Transaction; the future plans of Janus and Henderson with respect to the Funds and any proposed changes to the operations or structure of the Funds; and the future plans of Janus and Henderson with respect to the provision of services to the Funds, and the entities providing such services, including those affiliated with Janus. The Board also received information regarding the terms of the Transaction, anticipated management of the combined organization, the resources that each of Janus and Henderson bring to the combined organization and the process being followed by Janus and Henderson to integrate their organizations. The Board also received information regarding the impact of the Transaction on each of INTECH and Perkins.
In connection with the Board’s approval of New Advisory Agreements and New Sub-Advisory Agreements at its December 8, 2016 meeting, the Board also continued its on-going annual process to determine whether to continue the existing investment advisory agreements between Janus Capital and the Trust on behalf of each Fund (each, a “Current Advisory Agreement” and collectively, the “Current Advisory Agreements”) and the existing sub-advisory agreements between Janus Capital and each of the Funds that utilize INTECH or Perkins as sub-advisers (each, a “Current Sub-Advisory Agreement” and collectively, the “Current Sub-Advisory Agreements”). In this regard, the Board received and reviewed information provided by Janus and the respective Sub-Advisers in response to requests of the Board and its independent legal counsel. The Board also received and reviewed information and analysis provided by, and in response to requests of, its independent fee consultant. The Board noted that as part of this annual process, the Board had considered and was in the process of considering, numerous factors, including the nature and quality of services provided by Janus Capital and each Sub-Adviser, as applicable; investment performance, on an absolute basis and relative to appropriate peer groups and one or a combination of market indices; investment management fees, expense ratios and asset sizes of the Funds and peer groups; investment management fees charged to comparable investment companies, separate accounts and non-fund clients; Janus Capital’s profitability from managing the Funds; fall-out benefits to Janus Capital from its relationship to the Funds, including revenues derived from services provided to the Funds by affiliates of Janus Capital; and the potential benefits to Janus Capital, the Funds of receiving research services from broker/dealer firms in connection with the allocation of portfolio transactions to such firms.
In determining whether to approve the New Advisory Agreement for each Fund and the New Sub-Advisory Agreement for Funds managed by INTECH or Perkins in connection with the Transaction, and whether to recommend approval to Fund shareholders, the Board received information and made inquiries into all matters as it deemed appropriate. The Board reviewed and analyzed various factors it deemed relevant, including the following factors, among others, none of which by itself was considered dispositive:
· The terms of the New Advisory Agreements are substantially similar to the corresponding Current Advisory Agreements, and the contractual fee rate will not change. In this regard, see the discussion of the Board’s considerations with respect to its most recent approval of the Current Advisory Agreements prior to December 8, 2016, as disclosed in each Fund’s most recent prior annual or semi-annual shareholder report, as applicable.
· The terms of the New Sub-Advisory Agreements are substantially similar to the corresponding Current Sub-Advisory Agreements, and the contractual fee rate will not change. In this regard, see the discussion of the Board’s considerations with respect to its most recent approval of the Current Sub-Advisory Agreements prior to December 8, 2016, as disclosed in each Fund’s most recent prior annual or semi-annual shareholder report, as applicable.
· Janus Capital’s plans for the operation of the Funds, including its plans for the continued provision of all services currently provided to the Funds by Janus Capital and its affiliates, including, among others, investment advisory services, portfolio trading services, and Fund administrative and accounting services, and the personnel and resources proposed to support the provision of such services.
· The estimated profitability to Janus Capital from managing the Funds after the Transaction, including potential economies of scale and fall-out benefits to Janus Capital from its relationship to the Funds, including revenues derived from services provided to the Funds by affiliates of Janus Capital, and the potential benefits to Janus Capital, and the Funds of receiving research services from broker/dealer firms in connection with the allocation of portfolio transactions to such firms.
In connection with its deliberations, the Board received assurances from Janus, on behalf of itself and its affiliates (collectively, “Janus”) including the following:
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Additional Information (unaudited)
· Janus has provided to the Board such information as it believes is reasonably necessary to evaluate the New Advisory Agreements and New Sub-Advisory Agreements.
· Janus is committed to the continuance, without interruption, of services to the Funds of at least the type and quality currently provided by Janus Capital and its affiliates, or superior thereto.
· The Transaction is not expected to affect negatively the nature, extent or quality of the investment advisory services provided by Janus Capital to the Funds following the Transaction, and the investment advisory services are expected to be at least comparable to the services being provided under the Current Advisory Agreements and Current Sub-Advisory Agreements. In this regard, the Board noted specific representations that Janus does not intend for the nature, extent or quality of investment advisory and other services to be provided to the Funds following the Transaction to change, and the extent of such services were expected to increase based on the combined resources of the combined investment management organization after the Transaction, and should the nature, extent or quality of such services decline, Janus would commit the resources needed to return such services to pre-Transaction levels.
· The Funds’ current operations were expected to remain largely unchanged, except for certain fund reorganizations which will be separately considered by the Board, and such other changes as were or will be presented to the Board.
· The Transaction is not expected to result in any changes to the portfolio managers providing services to the Funds.
· After the Transaction, the distribution and marketing services provided to the Janus Funds were expected to be improved or enhanced based on the combined resources of Janus and Henderson. In this regard, Janus Capital advised the Board that after the Transaction, the extent of distribution and marketing services provided to the Janus Funds are expected to increase based on the combined resources of Janus and Henderson. This is due primarily to the anticipated increase of sales related resources and expanded global presence of the combined Janus Henderson organization, which is expected to enhance visibility and brand recognition of the Janus Henderson Funds.
· The intent of Janus Capital to take the necessary and appropriate steps to retain and attract key investment advisory personnel.
· The intent of Janus to take the necessary and appropriate steps to retain and attract key compliance, financial, fund accounting and administrative personnel supporting the management and oversight of the Funds.
· Janus is not aware of any express or implied term, condition, arrangement or understanding that would impose in its best judgement an “unfair burden” on any Fund as a result of the Transaction, as defined in Section 15(f) of the 1940 Act, and that Janus will take no action that would have the effect of imposing such an “unfair burden” on any Fund in connection with the Transaction.
Janus assured the Board that it intended to comply with Section 15(f) of the Investment Company Act of 1940, as amended. Section 15(f) provides a non-exclusive safe harbor for an investment adviser to an investment company or any of its affiliated persons to receive any amount or benefit in connection with a change in control of the investment adviser so long as two conditions are met. First, for a period of three years after the transaction, at least 75% of the board members of the investment company must not be interested persons of such investment adviser (as defined under the 1940 Act). The composition of the Board is in compliance with this provision of Section 15(f). In addition, after careful review and consideration, the Board determined that it would be in the best interests of the Funds to add to the Board an individual who currently acts as a non-interested board member of the Henderson Trust. The Board believes that this change in the Board composition will provide perspective and insight relating to experience working with the Henderson organization. The Board’s Nominating and Governance Committee considered a number of candidates and recommended that the Board nominate one proposed new trustee from those candidates who currently act as non-interested board members of the Henderson Trust. The Board approved that trustee nominee to serve on the Board, subject to election by the shareholders of the Funds and contingent on the closing of the Transaction. If the new trustee is elected and serves on the Board, the Board composition would continue to satisfy the provisions of Section 15(f).
To meet the second condition of Section 15(f), an “unfair burden” must not be imposed upon the investment company as a result of such transaction or any express or implied terms, conditions or understandings applicable thereto. The
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Additional Information (unaudited)
term “unfair burden” is defined in Section 15(f) to include any arrangement during the two-year period after the transaction, whereby the investment adviser, or any interested person of such adviser, receives or is entitled to receive any compensation, directly or indirectly, from the investment company or its shareholders (other than fees for bona fide investment advisory or other services) or from any person in connection with the purchase or sale of securities or other property to, from or on behalf of the investment company (other than bona fide ordinary compensation as principal underwriter for such investment company).
Janus represented that it does not believe that an “unfair burden” will be placed on the Funds as a result of the Transaction. In furtherance thereof, Janus has undertaken to pay the costs of preparing and distributing proxy materials to, and of holding the meetings of, the Funds’ shareholders (the “Meetings”), as well as other fees and expenses in connection with the Transaction, including the reasonable fees and expenses of legal counsel and consultants to the Funds and the Trustees. In addition, Janus has agreed, for a period of two years following the closing of the Transaction, (i) not to request any increases to advisory fees for the Funds, other than those proposed to and approved by the Board prior to the close of the Transaction, and (ii) to continue to use the current process by which expense caps are set annually for the Funds.
As a result of its review and consideration of the New Investment Advisory Agreements and New Sub-Advisory Agreements in connection with the Transaction, at a meeting on December 8, 2016, the Board voted unanimously to approve a New Investment Advisory Agreement for each Fund and a New Sub-Advisory Agreement for each Fund managed by INTECH or Perkins, and to recommend such agreements to the Funds’ shareholders for their approval.
Approval of Interim Advisory and Sub-Advisory Agreements with Janus Capital and Janus Capital Affiliates during the Period
In the event shareholders of a Fund do not approve such Fund’s New Advisory Agreement and/or New Sub-Advisory Agreement at the Meetings prior to the closing of the Transaction, Janus Capital proposed that an interim investment advisory agreement between Janus Capital and such Fund (each, an “Interim Advisory Agreement” and collectively, the “Interim Advisory Agreements”) and an interim sub-advisory agreement between Janus Capital and the applicable Sub-Adviser (each, an “Interim Sub-Advisory Agreement” and collectively, the “Interim Sub-Advisory Agreements”) take effect upon the closing of the Transaction. At the December 8, 2016 meeting, the Board, all of whom are Independent Trustees, unanimously approved an Interim Advisory Agreement for each Fund and an Interim Sub-Advisory Agreement for each applicable Fund in order to assure continuity of investment advisory services to the Funds and sub-advisory services to the sub-advised Funds after the Transaction. The terms of each Interim Advisory Agreement are substantially identical to those of the applicable Current Advisory Agreement and New Advisory Agreement, except for the term and escrow provisions described below. Similarly, the terms of each Interim Sub-Advisory Agreement are substantially identical to those of the Current Sub-Advisory Agreements and New Sub-Advisory Agreements, except for the term and escrow provisions described below. The Interim Advisory Agreement and Interim Sub-Advisory Agreement will continue in effect for a term ending on the earlier of 150 days from the closing of the Transaction (the “150-day period”) or when shareholders of the Fund approve the New Advisory Agreement and/or New Sub-Advisory Agreement. Pursuant to Rule 15a-4 under the 1940 Act, compensation earned by Janus Capital under an Interim Advisory Agreement and compensation earned by a Sub-Adviser under an Interim Sub-Advisory Agreement will be held in an interest-bearing escrow account. If shareholders of a Fund approve the New Advisory Agreement prior to the end of the 150-day period, the amount held in the escrow account under the Interim Advisory Agreement will be paid to Janus Capital. If shareholders of a Fund approve the New Advisory Agreement and New Sub-Advisory Agreement prior to the end of the 150-day period, the amount held in the escrow account under the Interim Sub-Advisory Agreement will be paid to the Sub-Adviser. If shareholders of a Fund do not approve the New Advisory Agreement prior to the end of the 150-day period, the Board will take such action as it deems to be in the best interests of the Fund, and Janus Capital will be paid the lesser of its costs incurred in performing its services under the Interim Advisory Agreement or the total amount in the escrow account, plus interest earned. If shareholders of a Fund do not approve the New Advisory Agreement and/or New Sub-Advisory Agreement prior to the end of the 150-day period, the Board will take such action as it deems to be in the best interests of the Fund, and the Sub-Adviser will be paid the lesser of its costs incurred in performing its services under the Interim Sub-Advisory Agreement or the total amount in the escrow account, plus interest earned.
Approval of an Amended and Restated Investment Advisory Agreement for Janus Portfolio
Janus Capital met with the Trustees on December 7-8, 2016, to discuss the approval of an amended and restated investment advisory agreement (the “Amended Advisory Agreement”) between Janus Capital and the Trust on behalf of
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Additional Information (unaudited)
Janus Portfolio (for the purposes of this section, the “Fund” refers to Janus Portfolio) and other matters related to the proposed changes to the Fund’s name, principal investment strategies, and portfolio management team (the “Realignment”). At the meeting, the Trustees also discussed the Amended Advisory Agreement and other matters related to the Realignment with their independent counsel in executive session. During the course of this meeting, the Trustees requested and considered such information as they deemed relevant to their deliberations. In addition, at prior meetings and during the course of this meeting the Board also considered the proposal to merge the Janus Fund, a series of Janus Investment Fund, into the Janus Research Fund, another series of Janus Investment Fund, and undertook a comprehensive process to evaluate the impact of the Transaction on the nature, quality and extent of services expected to be provided by Janus Capital to the Fund, including after the completion of the Transaction. For a fuller discussion of the Board’s consideration of the approval of a new investment advisory agreement for the Fund in connection with the Transaction, see “Approval of Advisory and Sub-Advisory Agreements with Janus and Janus Affiliates during the Period” above.
At a meeting of the Board of Trustees held on December 8, 2016, the Trustees approved the Amended Advisory Agreement and other matters related to the Realignment. In determining whether to approve the Amended Advisory Agreement, and whether to recommend approval to Fund shareholders, the Board received information and made inquiries into all matters as it deemed appropriate. The Board reviewed and analyzed various factors it deemed relevant, including the following factors, among others, none of which by itself was considered dispositive:
· the terms of the Amended Advisory Agreement are substantially the same as the Current Advisory Agreement, except for the change to the advisory fee rate based on the amount of such outperformance or underperformance (the “Full Performance Rate”) and cumulative investment record of the Fund’s benchmark index (the “Performance Fee Benchmark”);
· the estimated impact of the change to the Full Performance Rate and Performance Fee Benchmark on the amount of advisory fees to be paid by the Fund, including consideration of comparative pro forma data showing the advisory fees payable if the Amended Advisory Agreement had been in place in prior years;
· the Fund’s investment team will be able to more efficiently manage the Fund’s portfolio, assuming the merger of the Janus Fund into Janus Research Fund is implemented, which may also provide benefits from opportunities to aggregate trading across funds that have similar investment strategies;
· Janus Capital’s belief that the Fund shareholders may benefit from the Realignment, as a result of the research-driven investment process to be implemented, which includes lower historical transaction costs and potential performance gains from securities lending as compared to the Fund’s current investment approach;
· the Realignment was being proposed as part of Janus Capital’s efforts to streamline its product line;
· Janus Capital’s belief that the Fund would benefit from Janus Capital’s operational efficiencies resulting from the merger of the Janus Fund into the Janus Research Fund and the Realignment, including a potentially more efficient and effective investment management approach providing the potential for a growing fund and improved performance after the Realignment;
· the costs of seeking approval of the Amended Advisory Agreement will be borne by Janus Capital;
· the costs incurred to reposition the Fund’s portfolio in connection with the Realignment;
· the potential tax consequences of any repositioning of the Fund’s portfolio as a result of the Merger; and any potential benefits of Janus Capital and its affiliates as a result of the Realignment.
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Useful Information About Your Portfolio Report (unaudited)
The Management Commentary in this report includes valuable insight as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. A company may be allocated to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed in the Management Commentary are just that: opinions. They are a reflection based on best judgment at the time this report was compiled, which was December 31, 2016. As the investing environment changes, so could opinions. These views are unique and are not necessarily shared by fellow employees or by Janus in general.
Performance Overviews
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. When comparing the performance of the Portfolio with an index, keep in mind that market indices are not available for investment and do not reflect deduction of expenses.
Average annual total returns are quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
Schedule of Investments
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options, swaptions, and swaps follow the Portfolio’s Schedule of Investments (if applicable).
Statement of Assets and Liabilities
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
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Useful Information About Your Portfolio Report (unaudited)
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned, and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid, and expenses owed but not yet paid. Additionally, there may be other assets and liabilities such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
Statement of Operations
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
Statements of Changes in Net Assets
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors, and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
Financial Highlights
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios, and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the
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Useful Information About Your Portfolio Report (unaudited)
period. The next line reflects the total return for the period. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Do not confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the Portfolio’s yield because it does not take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager(s) and/or investment personnel. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Shareholder Meeting (unaudited)
A Special Meeting of Shareholders of the Portfolio was held on June 14, 2016. At the meeting, the following matter was voted on and approved by the Shareholders. Each whole or fractional vote reported represents one whole or fractional dollar of net asset value held on the record date for the meeting. The results of the Special Meeting of Shareholders are noted below.
Proposal
To elect eight Trustees, each of whom is considered “independent.”
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Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. Under the Portfolio’s Governance Procedures and Guidelines, the policy is for Trustees to retire no later than the end of the calendar year in which the Trustee turns 75. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. The Portfolio’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 58 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Except as otherwise disclosed, Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
William F. McCalpin | Chairman Trustee | 1/08-Present 6/02-Present | Managing Partner, Impact Investments, Athena Capital Advisors LLC (independent registered investment advisor) (since 2016) and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Chief Executive Officer, Imprint Capital (impact investment firm) (2013-2015) and Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 58 | Director of Mutual Fund Directors Forum (a non-profit organization serving independent directors of U.S. mutual funds), Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). |
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TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Alan A. Brown | Trustee | 1/13-Present | Executive Vice President, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 58 | Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of MotiveQuest LLC (strategic social market research company) (2003-2016); Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
William D. Cvengros | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 58 | Advisory Board Member, Innovate Partners Emerging |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Raudline Etienne | Trustee | 6/16-Present | Senior Advisor, Albright Stonebridge Group LLC (global strategy firm) (since 2016). Formerly, Senior Vice President (2011-2015), Albright Stonebridge Group LLC; and Deputy Comptroller and Chief Investment Officer, New York State Common Retirement Fund (public pension fund) (2008-2011). | 58 | Director of Brightwood Capital Advisors, LLC (since 2014). | |
Gary A. Poliner | Trustee | 6/16-Present | Retired. Formerly, President (2010-2013) and Executive Vice President and Chief Risk Officer (2009-2012) of Northwestern Mutual Life Insurance Company. | 58 | Director of MGIC Investment Corporation (private mortgage insurance) (since 2013) and West Bend Mutual Insurance Company (property/casualty insurance) (since 2013). Formerly, Trustee of Northwestern Mutual Life Insurance Company (2010-2013); Chairman and Director of Northwestern Mutual Series Fund, Inc. (2010-2012); and Director of Frank Russell Company (global asset management firm) (2008-2013). |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
James T. Rothe | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, L.P. (SBA SBIC fund focusing on private investment in public equity firms), and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004), and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 58 | Formerly, Director of Red Robin Gourmet Burgers, Inc. (RRGB) (2004-2014). | |
William D. Stewart | Trustee | 6/84-Present | Retired. Formerly, President and founder of HPS Products and Corporate Vice President of MKS Instruments, Boulder, CO (a provider of advanced process control systems for the semiconductor industry) (1976-2012). | 58 | None |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Linda S. Wolf | Trustee | 11/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 58 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014) and The Field Museum of Natural History (Chicago, IL) (until 2014). |
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Trustees and Officers (unaudited)
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period. |
OFFICERS | |||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Principal Occupations During the Past Five Years |
Michael Keough | Executive Vice President and Co-Portfolio Manager | 12/15-Present | Portfolio Manager for other Janus accounts and Analyst for Janus Capital. |
Mayur Saigal | Executive Vice President and Co-Portfolio Manager | 12/15-Present | Portfolio Manager for other Janus accounts and Analyst for Janus Capital. |
Darrell Watters | Executive Vice President and Co-Portfolio Manager | 5/07-Present | Vice President of Janus Capital and Portfolio Manager for other Janus accounts. |
Bruce L. Koepfgen | President and Chief Executive Officer | 7/14-Present | President of Janus Capital Group Inc. and Janus Capital Management LLC (since 2013); Executive Vice President and Director of Janus International Holding LLC (since 2011); Executive Vice President of Janus Distributors LLC (since 2011); Executive Vice President and Working Director of INTECH Investment Management LLC (since 2011); Executive Vice President and Director of Perkins Investment Management LLC (since 2011); and Executive Vice President and Director of Janus Management Holdings Corporation (since 2011). Formerly, Executive Vice President of Janus Services LLC (2011-2015), Janus Capital Group Inc. and Janus Capital Management LLC (2011-2013); and Chief Financial Officer of Janus Capital Group Inc., Janus Capital Management LLC, Janus Distributors LLC, Janus Management Holdings Corporation, and Janus Services LLC (2011-2013). |
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Trustees and Officers (unaudited)
OFFICERS | |||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Principal Occupations During the Past Five Years |
David R. Kowalski | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. |
Jesper Nergaard | Chief Financial Officer | 3/05-Present | Vice President of Janus Capital and Janus Services LLC. |
Kathryn L. Santoro 151 Detroit Street | Vice President, Chief Legal Counsel, and Secretary | 12/16-Present | Vice President of Janus Capital and Janus Services LLC (since 2016). Formerly, Vice President and Associate Counsel of Curian Capital, LLC and Curian Clearing LLC (2013-2016); and General Counsel and Secretary (2011-2012) and Vice President (2009-2012) of Old Mutual Capital, Inc. |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period. |
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Notes
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH® (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins® (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money. | ||||||||||||
Janus, INTECH and Perkins are registered trademarks of Janus International Holding LLC. © Janus International Holding LLC. Funds distributed by Janus Distributors LLC | ||||||||||||
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | |||||||||
C-0217-7530 | 109-02-81114 02-17 |
ANNUAL REPORT December 31, 2016 | |||
Janus Aspen Forty Portfolio | |||
Janus Aspen Series | |||
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HIGHLIGHTS · Portfolio management perspective · Investment strategy behind your portfolio · Portfolio performance, characteristics | |||
Table of Contents
Janus Aspen Forty Portfolio
Janus Aspen Forty Portfolio (unaudited)
PERFORMANCE OVERVIEW
For the 12-month period ended December 31, 2016, Janus Aspen Forty Portfolio’s Institutional Shares and Service Shares returned 2.20% and 1.94%, respectively, versus a return of 7.08% for the Portfolio’s primary benchmark, the Russell 1000 Growth Index. The Portfolio’s secondary benchmark, the S&P 500 Index, returned 11.96% for the period.
INVESTMENT ENVIRONMENT
Stocks registered gains in 2016, but experienced brief bouts of volatility. Equities started the year lower due to concerns about the health of the Chinese economy and fear about how falling oil prices could affect the energy sector. As fears grew about the global economy, more defensive areas of the market such as consumer staples and utilities companies outperformed. Midway through the year, the UK’s decision to leave the European Union (EU) in June’s “Brexit” referendum jolted markets, but investors soon regained their composure and sent shares higher. Stocks climbed after the November U.S. presidential election, on the expectation that the new administration would champion pro-growth initiatives. As economic growth prospects improved, cyclical stocks outperformed the broader market.
PERFORMANCE DISCUSSION
The Portfolio underperformed both its primary benchmark, the Russell 1000 Growth Index, and its secondary benchmark, the S&P 500 Index, during the period. As part of our investment strategy, we seek companies that have built clear, sustainable, competitive moats around their businesses, which should help them grow market share within their respective industries over time. Important competitive advantages could include a strong brand, network effects from a product or service that would be hard for a competitor to replicate, a lower cost structure than competitors in the industry, a distribution advantage or patent protection over valuable intellectual property. We think emphasizing these sustainable competitive advantages can be a meaningful driver of outperformance over longer time horizons because the market often underestimates the duration of growth for these companies and the long-term potential return to shareholders.
Over the course of the past year, our underperformance came during two brief periods. We fell behind the benchmark at the beginning of the year, when markets sold off due to fears about the global economy and investors rotated into more defensive areas of the market. We also underperformed at the end of the year, when prospects for an improving global economic picture led to a broad market rotation away from companies tied to secular growth trends toward companies with more cyclical growth prospects. As we note in our Outlook, many of the companies we own are tied to secular growth themes. While that hurt performance during the period, we invest with a long-term perspective and maintain a high level of conviction in the competitive advantages of our companies and secular themes underpinning growth potential for the stocks in our portfolio.
We also held a few stocks during the period that produced disappointing results that affected performance. Norwegian Cruise Line was the leading detractor during the period. We exited our position in the cruise line company due to poor execution by management during a period of time in which geopolitical factors impacted demand for their business.
Regeneron Pharmaceuticals was another detractor. Slower-than-expected adoption of a new drug the company recently launched has been a headwind for the company. However, we remain encouraged about many of the drugs in Regeneron’s pipeline, in addition to its existing drugs on the market.
Salesforce was another detractor. A rumor that the company was interested in acquiring Twitter was one reason that drove the stock lower. We didn’t think the acquisition was a natural fit for the business, and were
Janus Aspen Series | 1 |
Janus Aspen Forty Portfolio (unaudited)
pleased to see the company decide not to pursue the acquisition. We continue to like Salesforce’s position as a leader in cloud-based enterprise software, and believe it will benefit as marketing and sales departments move more functions from on-premises software to the cloud.
While some stocks negatively affected performance, we are pleased with the performance of a number of other positions. Construction aggregate company Vulcan Materials was a leading contributor to performance. The company benefited as residential and nonresidential aggregate markets recovered in the first half of the year. Improvements in highway infrastructure spending also aided the stock’s performance. We believe the macroeconomic environment is favorable for continued performance by Vulcan, which we believe enjoys strong competitive advantages around its business model and quarries, though we have trimmed the position as it has approached our price target.
Amazon was another leading contributor. Increasing profitability in its core retail business and growth in Amazon Web Services have helped drive the stock during the year. We believe Amazon is a good example of the types of competitively advantaged companies we tend to seek in our portfolio. Amazon has already rewritten the rules for retail shopping and we believe it will continue to gain consumers’ wallet share as more shopping moves from physical stores to online and mobile purchases. Meanwhile, Amazon Web Services is revolutionizing the way companies utilize IT services, using its scale to offer a disruptive pricing model to businesses seeking IT functions in the cloud.
Charles Schwab Corp. was also a large contributor. The stock benefited from the prospect of rising interest rates, which should boost the earnings from cash held in customers’ accounts. We believe the company’s strong brand, which is trusted among retail investors and registered investment advisers that use its services, is a strong competitive advantage for the company. We also believe its size and digital focus gives it a cost structure advantage, allowing it to offer trading and other financial services at lower costs than most competitors. Going forward, we believe the trends of investment advisors seeking independence from large wirehouses and households seeking lower cost investing services are long-term secular growth trends that will benefit Schwab.
OUTLOOK
Some of the enthusiasm reflected in the market’s rise since the presidential election is likely warranted. The new administration’s policies could spark better near-term economic growth and real wage growth for the U.S. consumer. On the margin, we’ve made a few changes in light of the potentially improved economic landscape, increasing our exposure to a few cyclical growth companies. Some of those companies were among our top contributors to performance.
While we made a few marginal changes, the bulk of our portfolio is still invested with companies tied to secular growth themes that should push forward independent of the macroeconomic environment. We believe the long-term growth potential of these companies remains compelling.
Many of the companies we hold are tied to secular themes that are still in their early innings: the shift from offline to online spending, the shift of enterprise software from on-premises data centers to the cloud, a proliferation of connected devices in the home and business, and a growing global middle class, to name just a few. It’s important to note that these companies aren’t just exposed to such trends. We believe they have built competitive moats around their businesses that uniquely position them as the key beneficiaries or pivotal players driving these themes forward. We plan to keep a long-term perspective as we watch these trends unfold in the coming years.
Thank you for your investment in Janus Aspen Forty Portfolio.
2 | DECEMBER 31, 2016 |
Janus Aspen Forty Portfolio (unaudited)
Portfolio At A Glance
December 31, 2016
5 Top Performers - Holdings |
|
|
| 5 Bottom Performers - Holdings |
| |
Contribution | Contribution | |||||
Vulcan Materials Co | 0.82% | Norwegian Cruise Line Holdings Ltd | -0.89% | |||
Amazon.com Inc | 0.75% | Regeneron Pharmaceuticals Inc | -0.66% | |||
Charles Schwab Corp | 0.67% | salesforce.com Inc | -0.50% | |||
Zoetis Inc | 0.61% | E*TRADE Financial Corp | -0.29% | |||
Boston Scientific Corp | 0.46% | Chipotle Mexican Grill Inc | -0.27% | |||
5 Top Performers - Sectors* |
|
|
|
|
| |
Portfolio | Portfolio Weighting | Russell 1000 Growth Index | ||||
Contribution | (Average % of Equity) | Weighting | ||||
Health Care | 1.24% | 18.54% | 16.47% | |||
Materials | 0.45% | 3.53% | 3.56% | |||
Financials | 0.41% | 11.79% | 4.68% | |||
Consumer Staples | 0.02% | 2.43% | 10.77% | |||
Real Estate | 0.00% | 0.75% | 0.91% | |||
5 Bottom Performers - Sectors* |
|
|
|
|
| |
Portfolio | Portfolio Weighting | Russell 1000 Growth Index | ||||
Contribution | (Average % of Equity) | Weighting | ||||
Information Technology | -2.87% | 30.08% | 29.48% | |||
Consumer Discretionary | -1.85% | 21.86% | 20.97% | |||
Industrials | -0.85% | 8.16% | 10.79% | |||
Telecommunication Services | -0.40% | 0.00% | 1.75% | |||
Other** | -0.34% | 2.86% | 0.00% | |||
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||||||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |||||
** | Not a GICS classified sector. |
Janus Aspen Series | 3 |
Janus Aspen Forty Portfolio (unaudited)
Portfolio At A Glance
December 31, 2016
5 Largest Equity Holdings - (% of Net Assets) | |
Microsoft Corp | |
Software | 6.3% |
Alphabet Inc - Class C | |
Internet Software & Services | 5.5% |
Zoetis Inc | |
Pharmaceuticals | 5.1% |
Mastercard Inc | |
Information Technology Services | 4.3% |
Amazon.com Inc | |
Internet & Direct Marketing Retail | 4.1% |
25.3% |
Asset Allocation - (% of Net Assets) | |||||
Common Stocks | 99.8% | ||||
Investment Companies | 1.3% | ||||
Other | (1.1)% | ||||
100.0% |
Top Country Allocations - Long Positions - (% of Investment Securities) | |
As of December 31, 2016 | As of December 31, 2015 |
4 | DECEMBER 31, 2016 |
Janus Aspen Forty Portfolio (unaudited)
Performance
See important disclosures on the next page. |
�� | |||||||||
| Expense Ratios - | ||||||||
Average Annual Total Return - for the periods ended December 31, 2016 |
|
| per the May 1, 2016 prospectuses | ||||||
|
| One | Five | Ten | Since |
|
| Total Annual Fund | |
Institutional Shares |
| 2.20% | 15.23% | 8.52% | 10.56% |
|
| 0.74% | |
Service Shares |
| 1.94% | 14.94% | 8.25% | 10.24% |
|
| 0.99% | |
Russell 1000 Growth Index |
| 7.08% | 14.50% | 8.33% | 6.63% |
|
|
| |
S&P 500 Index |
| 11.96% | 14.66% | 6.95% | 7.37% |
|
|
| |
Morningstar Quartile - Institutional Shares |
| 3rd | 1st | 1st | 1st |
|
|
| |
Morningstar Ranking - based on total returns for Large Growth Funds |
| 864/1,497 | 131/1,371 | 120/1,170 | 21/667 |
|
|
|
This Portfolio has a performance-based management fee that may adjust up or down based on the Portfolio’s performance.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, portfolio holdings and other details.
Returns shown do not represent actual returns since they do not include insurance charges. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
See Financial Highlights for actual expense ratios during the reporting period.
Performance for Service Shares prior to December 31, 1999 reflects the performance of Institutional Shares, adjusted to reflect the expenses of Service Shares.
Ranking is for the share class shown only; other classes may have different performance characteristics.
© 2016 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
Janus Aspen Series | 5 |
Janus Aspen Forty Portfolio (unaudited)
Performance
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio's holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Effective January 12, 2016, Douglas Rao and Nick Schommer are Co-Portfolio Managers of the Portfolio.
*The Portfolio’s inception date – May 1, 1997
6 | DECEMBER 31, 2016 |
Janus Aspen Forty Portfolio (unaudited)
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; 12b-1 distribution and shareholder servicing fees (applicable to Service Shares only); transfer agent fees and expenses payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as any charges at the separate account level or contract level. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Actual | Hypothetical | |||||||||
| Beginning | Ending | Expenses |
| Beginning | Ending | Expenses | Net Annualized | ||
Institutional Shares | $1,000.00 | $1,037.40 | $3.79 |
| $1,000.00 | $1,021.42 | $3.76 | 0.74% | ||
Service Shares | $1,000.00 | $1,036.40 | $5.07 |
| $1,000.00 | $1,020.16 | $5.03 | 0.99% | ||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
Janus Aspen Series | 7 |
Janus Aspen Forty Portfolio
Schedule of Investments
December 31, 2016
| Value | ||||||
Common Stocks – 99.8% | |||||||
Aerospace & Defense – 1.5% | |||||||
General Dynamics Corp | 59,190 | $10,219,745 | |||||
Automobiles – 0.9% | |||||||
Tesla Motors Inc* | 28,318 | 6,051,273 | |||||
Biotechnology – 5.4% | |||||||
Celgene Corp* | 227,095 | 26,286,246 | |||||
Regeneron Pharmaceuticals Inc* | 29,477 | 10,820,712 | |||||
37,106,958 | |||||||
Capital Markets – 11.6% | |||||||
Charles Schwab Corp | 619,369 | 24,446,495 | |||||
Goldman Sachs Group Inc | 83,422 | 19,975,398 | |||||
Intercontinental Exchange Inc | 430,538 | 24,290,954 | |||||
S&P Global Inc | 103,297 | 11,108,559 | |||||
79,821,406 | |||||||
Construction Materials – 2.5% | |||||||
Vulcan Materials Co | 139,108 | 17,409,366 | |||||
Containers & Packaging – 2.1% | |||||||
Sealed Air Corp | 320,324 | 14,523,490 | |||||
Equity Real Estate Investment Trusts (REITs) – 1.6% | |||||||
Crown Castle International Corp | 128,076 | 11,113,155 | |||||
Food & Staples Retailing – 2.5% | |||||||
Costco Wholesale Corp | 108,159 | 17,317,338 | |||||
Health Care Equipment & Supplies – 4.2% | |||||||
Boston Scientific Corp* | 1,131,597 | 24,476,443 | |||||
DexCom Inc* | 75,893 | 4,530,812 | |||||
29,007,255 | |||||||
Hotels, Restaurants & Leisure – 1.4% | |||||||
Starbucks Corp | 173,123 | 9,611,789 | |||||
Industrial Conglomerates – 4.0% | |||||||
General Electric Co | 859,804 | 27,169,806 | |||||
Information Technology Services – 5.9% | |||||||
Mastercard Inc | 287,977 | 29,733,625 | |||||
PayPal Holdings Inc* | 271,988 | 10,735,366 | |||||
40,468,991 | |||||||
Internet & Direct Marketing Retail – 7.9% | |||||||
Amazon.com Inc* | 37,700 | 28,270,099 | |||||
Ctrip.com International Ltd (ADR)* | 201,394 | 8,055,760 | |||||
Netflix Inc* | 47,726 | 5,908,479 | |||||
Priceline Group Inc* | 8,123 | 11,908,805 | |||||
54,143,143 | |||||||
Internet Software & Services – 10.3% | |||||||
Alphabet Inc - Class C* | 49,016 | 37,831,529 | |||||
CoStar Group Inc* | 74,748 | 14,089,251 | |||||
Facebook Inc | 163,360 | 18,794,568 | |||||
70,715,348 | |||||||
Life Sciences Tools & Services – 2.3% | |||||||
Quintiles IMS Holdings Inc* | 211,937 | 16,117,809 | |||||
Pharmaceuticals – 10.0% | |||||||
Allergan plc | 100,155 | 21,033,552 | |||||
Bristol-Myers Squibb Co | 220,950 | 12,912,318 | |||||
Zoetis Inc | 655,649 | 35,096,891 | |||||
69,042,761 | |||||||
Road & Rail – 2.5% | |||||||
CSX Corp | 484,109 | 17,394,036 | |||||
Semiconductor & Semiconductor Equipment – 1.3% | |||||||
Texas Instruments Inc | 123,210 | 8,990,634 | |||||
Software – 16.7% | |||||||
Activision Blizzard Inc | 486,235 | 17,557,946 | |||||
Adobe Systems Inc* | 215,445 | 22,180,063 | |||||
Microsoft Corp | 694,073 | 43,129,697 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
8 | DECEMBER 31, 2016 |
Janus Aspen Forty Portfolio
Schedule of Investments
December 31, 2016
| Value | ||||||
Common Stocks – (continued) | |||||||
Software – (continued) | |||||||
salesforce.com Inc* | 341,712 | $23,393,604 | |||||
Workday Inc* | 123,877 | 8,187,031 | |||||
114,448,341 | |||||||
Specialty Retail – 2.4% | |||||||
Lowe's Cos Inc | 231,436 | 16,459,728 | |||||
Textiles, Apparel & Luxury Goods – 2.8% | |||||||
NIKE Inc | 377,275 | 19,176,888 | |||||
Total Common Stocks (cost $542,902,785) | 686,309,260 | ||||||
Investment Companies – 1.3% | |||||||
Money Markets – 1.3% | |||||||
Janus Cash Liquidity Fund LLC, 0.4708%ºº,£ (cost $8,949,000) | 8,949,000 | 8,949,000 | |||||
Total Investments (total cost $551,851,785) – 101.1% | 695,258,260 | ||||||
Liabilities, net of Cash, Receivables and Other Assets – (1.1)% | (7,739,750) | ||||||
Net Assets – 100% | $687,518,510 |
Summary of Investments by Country - (Long Positions) (unaudited) | |||||
% of | |||||
Investment | |||||
Country | Value | Securities | |||
United States | $687,202,500 | 98.8 | % | ||
China | 8,055,760 | 1.2 |
Total | $695,258,260 | 100.0 | % |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 9 |
Janus Aspen Forty Portfolio
Notes to Schedule of Investments and Other Information
Russell 1000® Growth Index | Measures the performance of those Russell 1000® companies with higher price-to-book ratios and higher forecasted growth values. |
S&P 500® Index | Measures broad U.S. equity performance. |
ADR | American Depositary Receipt |
LLC | Limited Liability Company |
PLC | Public Limited Company |
* | Non-income producing security. |
ºº | Rate shown is the 7-day yield as of December 31, 2016. |
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. The following securities were considered affiliated companies for all or some portion of the year ended December 31, 2016. Unless otherwise indicated, all information in the table is for the year ended December 31, 2016. |
Share | Share | ||||||||||||||
Balance | Balance | Realized | Dividend | Value | |||||||||||
at 12/31/15 | Purchases | Sales | at 12/31/16 | Gain/(Loss) | Income | at 12/31/16 | |||||||||
Janus Cash Collateral Fund LLC | — | 134,892,205 | (134,892,205) | — | $— | $102,510(1) | $— | ||||||||
Janus Cash Liquidity Fund LLC | 24,691,025 | 231,708,029 | (247,450,054) | 8,949,000 | — | 73,007 | 8,949,000 | ||||||||
Total | $— | $175,517 | $8,949,000 | ||||||||||||
(1) | Net of income paid to the securities lending agent and rebates paid to the borrowing counterparties. |
The following is a summary of the inputs that were used to value the Portfolio’s investments in securities and other financial instruments as of December 31, 2016. See Notes to Financial Statements for more information. | ||||||||||||
Valuation Inputs Summary | ||||||||||||
Level 2 - | Level 3 - | |||||||||||
Level 1 - | Other Significant | Significant | ||||||||||
Quotes Prices | Observable Inputs | Unobservable Inputs | ||||||||||
Assets | ||||||||||||
Investments in Securities: | ||||||||||||
Common Stocks | $ | 686,309,260 | $ | - | $ | - | ||||||
Investment Companies | - | 8,949,000 | - | |||||||||
Total Assets | $ | 686,309,260 | $ | 8,949,000 | $ | - | ||||||
10 | DECEMBER 31, 2016 |
Janus Aspen Forty Portfolio
Statement of Assets and Liabilities
December 31, 2016
|
|
|
|
|
|
|
Assets: | ||||||
Investments, at cost | $ | 551,851,785 | ||||
Unaffiliated investments, at value | 686,309,260 | |||||
Affiliated investments, at value | 8,949,000 | |||||
Cash | 719 | |||||
Non-interested Trustees' deferred compensation | 12,898 | |||||
Receivables: | ||||||
Dividends | 291,267 | |||||
Foreign tax reclaims | 68,884 | |||||
Portfolio shares sold | 48,027 | |||||
Dividends from affiliates | 1,128 | |||||
Other assets | 9,238 | |||||
Total Assets |
|
| 695,690,421 |
| ||
Liabilities: | ||||||
Payables: | — | |||||
Portfolio shares repurchased | 7,517,146 | |||||
Advisory fees | 382,102 | |||||
12b-1 Distribution and shareholder servicing fees | 100,282 | |||||
Transfer agent fees and expenses | 33,722 | |||||
Professional fees | 22,387 | |||||
Non-interested Trustees' deferred compensation fees | 12,898 | |||||
Portfolio administration fees | 6,100 | |||||
Non-interested Trustees' fees and expenses | 6,015 | |||||
Custodian fees | 303 | |||||
Accrued expenses and other payables | 90,956 | |||||
Total Liabilities |
|
| 8,171,911 |
| ||
Net Assets |
| $ | 687,518,510 |
| ||
Net Assets Consist of: | ||||||
Capital (par value and paid-in surplus) | $ | 503,801,277 | ||||
Undistributed net investment income/(loss) | 121,926 | |||||
Undistributed net realized gain/(loss) from investments and foreign currency transactions | 40,192,137 | |||||
Unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 143,403,170 | |||||
Total Net Assets |
| $ | 687,518,510 |
| ||
Net Assets - Institutional Shares | $ | 257,008,705 | ||||
Shares Outstanding, $0.01 Par Value (unlimited shares authorized) | 7,984,755 | |||||
Net Asset Value Per Share |
| $ | 32.19 |
| ||
Net Assets - Service Shares | $ | 430,509,805 | ||||
Shares Outstanding, $0.01 Par Value (unlimited shares authorized) | 13,983,137 | |||||
Net Asset Value Per Share |
| $ | 30.79 |
|
See Notes to Financial Statements. | |
Janus Aspen Series | 11 |
Janus Aspen Forty Portfolio
Statement of Operations
For the year ended December 31, 2016
|
|
|
|
|
|
Investment Income: | |||||
| Dividends | $ | 6,306,962 | ||
Affiliated securities lending income, net | 102,510 | ||||
Dividends from affiliates | 73,007 | ||||
Foreign tax withheld | (9,724) | ||||
Total Investment Income |
| 6,472,755 |
| ||
Expenses: | |||||
Advisory fees | 4,714,223 | ||||
12b-1Distribution and shareholder servicing fees: | |||||
Service Shares | 1,157,938 | ||||
Transfer agent administrative fees and expenses: | |||||
Institutional Shares | 92,686 | ||||
Service Shares | 157,676 | ||||
Other transfer agent fees and expenses: | |||||
Institutional Shares | 4,952 | ||||
Service Shares | 4,688 | ||||
Portfolio administration fees | 65,641 | ||||
Shareholder reports expense | 59,344 | ||||
Professional fees | 48,465 | ||||
Non-interested Trustees’ fees and expenses | 23,574 | ||||
Registration fees | 12,062 | ||||
Custodian fees | 11,222 | ||||
Other expenses | 139,681 | ||||
Total Expenses |
| 6,492,152 |
| ||
Net Investment Income/(Loss) |
| (19,397) |
| ||
Net Realized Gain/(Loss) on Investments: | |||||
Investments and foreign currency transactions | 40,288,179 | ||||
Total Net Realized Gain/(Loss) on Investments |
| 40,288,179 |
| ||
Change in Unrealized Net Appreciation/Depreciation: | |||||
Investments, foreign currency translations and non-interested Trustees’ deferred compensation | (26,711,467) | ||||
Total Change in Unrealized Net Appreciation/Depreciation |
| (26,711,467) |
| ||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 13,557,315 |
| ||
See Notes to Financial Statements. | |
12 | DECEMBER 31, 2016 |
Janus Aspen Forty Portfolio
Statements of Changes in Net Assets
|
|
| Year ended |
| Year ended | |||
Operations: | ||||||||
Net investment income/(loss) | $ | (19,397) | $ | (1,217,012) | ||||
Net realized gain/(loss) on investments | 40,288,179 | 103,601,643 | ||||||
Change in unrealized net appreciation/depreciation | (26,711,467) | (11,093,868) | ||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations |
| 13,557,315 |
|
| 91,290,763 | |||
Dividends and Distributions to Shareholders: | ||||||||
Distributions from Net Realized Gain from Investment Transactions | ||||||||
Institutional Shares | (37,062,653) | (57,445,111) | ||||||
Service Shares | (65,123,788) | (102,554,820) | ||||||
Net Decrease from Dividends and Distributions to Shareholders |
| (102,186,441) |
|
| (159,999,931) | |||
Capital Share Transactions: | ||||||||
Institutional Shares | (7,170,480) | 18,828,189 | ||||||
Service Shares | (13,410,718) | 54,810,568 | ||||||
Net Increase/(Decrease) from Capital Share Transactions |
| (20,581,198) |
|
| 73,638,757 | |||
Net Increase/(Decrease) in Net Assets |
| (109,210,324) |
|
| 4,929,589 | |||
Net Assets: | ||||||||
Beginning of period | 796,728,834 | 791,799,245 | ||||||
| End of period | $ | 687,518,510 |
| $ | 796,728,834 | ||
Undistributed Net Investment Income/(Loss) | $ | 121,926 |
| $ | (16,127) |
See Notes to Financial Statements. | |
Janus Aspen Series | 13 |
Janus Aspen Forty Portfolio
Financial Highlights
Institutional Shares | ||||||||||||||||||
For a share outstanding during each year ended December 31 |
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
| |||
Net Asset Value, Beginning of Period |
| $36.37 |
|
| $40.27 |
|
| $53.34 |
|
| $40.95 |
|
| $33.22 |
| |||
Income/(Loss) from Investment Operations: | ||||||||||||||||||
Net investment income/(loss) | 0.05(1) | 0.03(1) | 0.03(1) | 0.38 | 0.47 | |||||||||||||
Net realized and unrealized gain/(loss) | 0.58 | 4.77 | 3.08 | 12.34 | 7.54 | |||||||||||||
Total from Investment Operations |
| 0.63 |
|
| 4.80 |
|
| 3.11 |
|
| 12.72 |
|
| 8.01 |
| |||
Less Dividends and Distributions: | ||||||||||||||||||
Dividends (from net investment income) | — | — | (0.09) | (0.33) | (0.28) | |||||||||||||
Distributions (from capital gains) | (4.81) | (8.70) | (16.09) | — | — | |||||||||||||
Total Dividends and Distributions |
| (4.81) |
|
| (8.70) |
|
| (16.18) |
|
| (0.33) |
|
| (0.28) |
| |||
Net Asset Value, End of Period | $32.19 | $36.37 | $40.27 | $53.34 | $40.95 | |||||||||||||
Total Return* |
| 2.20% |
|
| 12.22% |
|
| 8.73% |
|
| 31.23% |
|
| 24.16% |
| |||
Net Assets, End of Period (in thousands) | $257,009 | $295,725 | $299,546 | $355,429 | $488,374 | |||||||||||||
Average Net Assets for the Period (in thousands) | $273,374 | $298,904 | $307,359 | $491,231 | $512,799 | |||||||||||||
Ratios to Average Net Assets**: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Ratio of Gross Expenses | 0.72% | 0.69% | 0.57% | 0.55% | 0.55% | |||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) | 0.72% | 0.69% | 0.57% | 0.55% | 0.55% | |||||||||||||
Ratio of Net Investment Income/(Loss) | 0.15% | 0.08% | 0.07% | 0.31% | 1.03% | |||||||||||||
Portfolio Turnover Rate | 53% | 55% | 46% | 61% | 10% | |||||||||||||
1 |
Service Shares | ||||||||||||||||||
For a share outstanding during each year ended December 31 |
| 2016 |
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
| |||
Net Asset Value, Beginning of Period |
| $35.08 |
|
| $39.21 |
|
| $52.40 |
|
| $40.28 |
|
| $32.72 |
| |||
Income/(Loss) from Investment Operations: | ||||||||||||||||||
Net investment income/(loss) | (0.03)(1) | (0.06)(1) | (0.07)(1) | —(2) | 0.31 | |||||||||||||
Net realized and unrealized gain/(loss) | 0.55 | 4.63 | 2.99 | 12.38 | 7.47 | |||||||||||||
Total from Investment Operations |
| 0.52 |
|
| 4.57 |
|
| 2.92 |
|
| 12.38 |
|
| 7.78 |
| |||
Less Dividends and Distributions: | ||||||||||||||||||
Dividends (from net investment income) | — | — | (0.02) | (0.26) | (0.22) | |||||||||||||
Distributions (from capital gains) | (4.81) | (8.70) | (16.09) | — | — | |||||||||||||
Total Dividends and Distributions |
| (4.81) |
|
| (8.70) |
|
| (16.11) |
|
| (0.26) |
|
| (0.22) |
| |||
Net Asset Value, End of Period | $30.79 | $35.08 | $39.21 | $52.40 | $40.28 | |||||||||||||
Total Return* |
| 1.94% |
|
| 11.94% |
|
| 8.47% |
|
| 30.89% |
|
| 23.82% |
| |||
Net Assets, End of Period (in thousands) | $430,510 | $501,003 | $492,253 | $526,971 | $471,002 | |||||||||||||
Average Net Assets for the Period (in thousands) | $464,943 | $501,868 | $493,575 | $486,845 | $468,967 | |||||||||||||
Ratios to Average Net Assets**: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Ratio of Gross Expenses | 0.97% | 0.94% | 0.82% | 0.81% | 0.80% | |||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) | 0.97% | 0.94% | 0.82% | 0.81% | 0.80% | |||||||||||||
Ratio of Net Investment Income/(Loss) | (0.09)% | (0.17)% | (0.17)% | 0.04% | 0.81% | |||||||||||||
Portfolio Turnover Rate | 53% | 55% | 46% | 61% | 10% | |||||||||||||
* Total return not annualized for periods of less than one full year. ** Annualized for periods of less than one full year. (1) Per share amounts are calculated based on average shares outstanding during the year or period. (2) Less than $0.005 on a per share basis. |
See Notes to Financial Statements. | |
14 | DECEMBER 31, 2016 |
Janus Aspen Forty Portfolio
Notes to Financial Statements
1. Organization and Significant Accounting Policies
Janus Aspen Forty Portfolio (the “Portfolio”) is a series fund. The Portfolio is part of Janus Aspen Series (the “Trust”), which is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company, and therefore has applied the specialized accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. The Trust offers twelve portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio seeks long-term growth of capital. The Portfolio is classified as nondiversified, as defined in the 1940 Act.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Each class represents an interest in the same portfolio of investments. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
Shareholders, including other portfolios, participating insurance companies, as well as accounts, may from time to time own (beneficially or of record) a significant percentage of the Portfolio’s Shares and can be considered to “control” the Portfolio when that ownership exceeds 25% of the Portfolio’s assets (and which may differ from control as determined in accordance with accounting principles generally accepted in the United States of America).
The following accounting policies have been followed by the Portfolio and are in conformity with accounting principles generally accepted in the United States of America.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is no current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). The Portfolio will determine the market value of individual securities held by it by using prices provided by one or more approved professional pricing services or, as needed, by obtaining market quotations from independent broker-dealers. Most debt securities are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Certain short-term securities maturing within 60 days or less may be evaluated and valued on an amortized cost basis provided that the amortized cost determined approximates market value. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. Special valuation considerations may apply with respect to “odd-lot” fixed-income transactions which, due to their small size, may receive evaluated prices by pricing services which reflect a large block trade and not what actually could be obtained for the odd-lot position. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Valuation Inputs Summary
FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements regarding fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that
Janus Aspen Series | 15 |
Janus Aspen Forty Portfolio
Notes to Financial Statements
market participants would use in pricing an asset or liability and establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. These inputs are summarized into three broad levels:
Level 1 – Unadjusted quoted prices in active markets the Portfolio has the ability to access for identical assets or liabilities.
Level 2 – Observable inputs other than unadjusted quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Assets or liabilities categorized as Level 2 in the hierarchy generally include: debt securities fair valued in accordance with the evaluated bid or ask prices supplied by a pricing service; securities traded on OTC markets and listed securities for which no sales are reported that are fair valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees; certain short-term debt securities with maturities of 60 days or less that are fair valued at amortized cost; and equity securities of foreign issuers whose fair value is determined by using systematic fair valuation models provided by independent third parties in order to adjust for stale pricing which may occur between the close of certain foreign exchanges and the close of the NYSE. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, swaps, investments in unregistered investment companies, options, and forward contracts.
Level 3 – Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the Portfolio’s own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for fair valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2016 to fair value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
There were no transfers between Level 1, Level 2 and Level 3 of the fair value hierarchy during the year. The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Portfolio is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
16 | DECEMBER 31, 2016 |
Janus Aspen Forty Portfolio
Notes to Financial Statements
Indemnifications
In the normal course of business, the Portfolio may enter into contracts that contain provisions for indemnification of other parties against certain potential liabilities. The Portfolio’s maximum exposure under these arrangements is unknown, and would involve future claims that may be made against the Portfolio that have not yet occurred. Currently, the risk of material loss from such claims is considered remote.
Foreign Currency Translations
The Portfolio does not isolate that portion of the results of operations resulting from the effect of changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held at the date of the financial statements. Net unrealized appreciation or depreciation of investments and foreign currency translations arise from changes in the value of assets and liabilities, including investments in securities held at the date of the financial statements, resulting from changes in the exchange rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and receivables that are denominated in foreign currencies. The payables and receivables are generally related to foreign security transactions and income translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, counterparty risk, political and economic risk, regulatory risk and equity risk. Risks may arise from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividends and Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
2. Other Investments and Strategies
Additional Investment Risk
The financial crisis in both the U.S. and global economies over the past several years has resulted, and may continue to result, in a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks, took steps to support the financial markets. The withdrawal of this support, a failure of measures put in place to respond to the crisis, or investor perception that such efforts were not sufficient could each negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries continue to impact many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. As a result, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) provided for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expanded federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act remain pending
Janus Aspen Series | 17 |
Janus Aspen Forty Portfolio
Notes to Financial Statements
and will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced, and may continue to experience, severe economic and financial difficulties. In particular, many EU nations are susceptible to economic risks associated with high levels of debt, notably due to investments in sovereign debt of countries such as Greece, Italy, Spain, Portugal, and Ireland. Many non-governmental issuers, and even certain governments, have defaulted on, or been forced to restructure, their debts. Many other issuers have faced difficulties obtaining credit or refinancing existing obligations. Financial institutions have in many cases required government or central bank support, have needed to raise capital, and/or have been impaired in their ability to extend credit. As a result, financial markets in the EU experienced extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world. Greece, Ireland, and Portugal have already received one or more "bailouts" from other Eurozone member states, and it is unclear how much additional funding they will require or if additional Eurozone member states will require bailouts in the future. The risk of investing in securities in the European markets may also be heightened due to the referendum in which the United Kingdom voted to exit the EU (known as “Brexit”). One or more other countries may also abandon the euro and/or withdraw from the EU, placing its currency and banking system in jeopardy.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not. A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk with respect to financial assets and liabilities approximates its carrying value.
The Portfolio may be exposed to counterparty risk through participation in various programs, including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, corporate bonds, preferred stocks, and other equity securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
18 | DECEMBER 31, 2016 |
Janus Aspen Forty Portfolio
Notes to Financial Statements
Securities Lending
Under procedures adopted by the Trustees, the Portfolio may seek to earn additional income by lending securities to qualified parties. Deutsche Bank AG acts as securities lending agent and a limited purpose custodian or subcustodian to receive and disburse cash balances and cash collateral, hold short-term investments, hold collateral, and perform other custodian functions. The Portfolio may lend portfolio securities in an amount equal to up to 1/3 of its total assets as determined at the time of the loan origination. There is the risk of delay in recovering a loaned security or the risk of loss in collateral rights if the borrower fails financially. In addition, Janus Capital makes efforts to balance the benefits and risks from granting such loans. All loans will be continuously secured by collateral which may consist of cash, U.S. Government securities, domestic and foreign short-term debt instruments, letters of credit, time deposits, repurchase agreements, money market mutual funds or other money market accounts, or such other collateral as permitted by the SEC. If the Portfolio is unable to recover a security on loan, the Portfolio may use the collateral to purchase replacement securities in the market. There is a risk that the value of the collateral could decrease below the cost of the replacement security by the time the replacement investment is made, resulting in a loss to the Portfolio.
Upon receipt of cash collateral, Janus Capital may invest it in affiliated or non-affiliated cash management vehicles, whether registered or unregistered entities, as permitted by the 1940 Act and rules promulgated thereunder. Janus Capital currently intends to invest the cash collateral in a cash management vehicle for which Janus Capital serves as investment adviser, Janus Cash Collateral Fund LLC. An investment in Janus Cash Collateral Fund LLC is generally subject to the same risks that shareholders experience when investing in similarly structured vehicles, such as the potential for significant fluctuations in assets as a result of the purchase and redemption activity of the securities lending program, a decline in the value of the collateral, and possible liquidity issues. Such risks may delay the return of the cash collateral and cause the Portfolio to violate its agreement to return the cash collateral to a borrower in a timely manner. As adviser to the Portfolio and Janus Cash Collateral Fund LLC, Janus Capital has an inherent conflict of interest as a result of its fiduciary duties to both the Portfolio and Janus Cash Collateral Fund LLC. Additionally, Janus Capital receives an investment advisory fee of 0.05% for managing Janus Cash Collateral Fund LLC, but it may not receive a fee for managing certain other affiliated cash management vehicles in which the Portfolio may invest, and therefore may have an incentive to allocate preferred investment opportunities to investment vehicles for which it is receiving a fee.
The value of the collateral must be at least 102% of the market value of the loaned securities that are denominated in U.S. dollars and 105% of the market value of the loaned securities that are not denominated in U.S. dollars. Loaned securities and related collateral are marked-to-market each business day based upon the market value of the loaned securities at the close of business, employing the most recent available pricing information. Collateral levels are then adjusted based on this mark-to-market evaluation.
The cash collateral invested by Janus Capital is disclosed in the Schedule of Investments (if applicable). Income earned from the investment of the cash collateral, net of rebates paid to, or fees paid by, borrowers and less the fees paid to the lending agent are included as “Affiliated securities lending income, net” on the Statement of Operations. There were no securities on loan as of December 31, 2016.
3. Investment Advisory Agreements and Other Transactions with Affiliates
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The Portfolio’s "base" fee rate prior to any performance adjustment (expressed as an annual rate) is 0.64%.
The investment advisory fee rate is determined by calculating a base fee and applying a performance adjustment. The base fee rate is the same as the contractual investment advisory fee rate. The performance adjustment either increases or decreases the base fee depending on how well the Portfolio has performed relative to its benchmark index. The Portfolio's benchmark index used in the calculation is the Russell 1000® Growth Index.
The calculation of the performance adjustment applies as follows:
Investment Advisory Fee = Base Fee Rate +/- Performance Adjustment
The investment advisory fee rate paid to Janus Capital by the Portfolio consists of two components: (1) a base fee calculated by applying the contractual fixed rate of the advisory fee to the Portfolio’s average daily net assets during the previous month (“Base Fee Rate”), plus or minus (2) a performance-fee adjustment (“Performance Adjustment”) calculated by applying a variable rate of up to 0.15% (positive or negative) to the Portfolio’s average daily net assets during the applicable performance measurement period, which is generally the previous 36 months.
Janus Aspen Series | 19 |
Janus Aspen Forty Portfolio
Notes to Financial Statements
The Portfolio’s prospectuses and statement(s) of additional information contain additional information about performance-based fees. The amount shown as advisory fees on the Statement of Operations reflects the Base Fee Rate plus/minus any Performance Adjustment. For the year ended December 31, 2016, the performance adjusted investment advisory fee rate before any waivers and/or reimbursements of expenses is 0.64%.
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. Effective May 1, 2016, Janus Services receives an administrative services fee at an annual rate of 0.05% of the average daily net assets of the Portfolio for arranging for the provision by participating insurance companies and qualified plan service providers of administrative services, including recordkeeping, subaccounting, order processing, or other shareholder services provided on behalf of contract holders or plan participants investing in the Portfolio. Other shareholder services may include the provision of order confirmations, periodic account statements, forwarding prospectuses, shareholder reports, and other materials to existing investors, and answering inquiries regarding accounts. Janus Services expects to use this entire fee to compensate insurance companies and qualified plan service providers for providing these services to their customers who invest in the Portfolio. Any unused portion will be reimbursed to the applicable share class at least annually.
In addition, Janus Services provides or arranges for the provision of certain other internal administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for these internal services related to the shares, except for out-of-pocket costs. These amounts are disclosed as “Other transfer agent fees and expenses” on the Statement of Operations.
Under a distribution and shareholder servicing plan (the “Plan”) adopted in accordance with Rule 12b-1 under the 1940 Act, the Service Shares may pay the Trust’s distributor, Janus Distributors LLC (“Janus Distributors”), a wholly-owned subsidiary of Janus Capital, a fee for the sale and distribution and/or shareholder servicing of the Service Shares at an annual rate of up to 0.25% of the average daily net assets of the Service Shares. Under the terms of the Plan, the Trust is authorized to make payments to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder services performed by such entities. These amounts are disclosed as “12b-1 Distribution and shareholder servicing fees” on the Statement of Operations. Payments under the Plan are not tied exclusively to actual 12b-1 distribution and servicing fees, and the payments may exceed 12b-1 distribution and servicing fees actually incurred. If any of the Portfolio’s actual 12b-1 distribution and servicing fees incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “12b-1 Distribution fees and shareholder servicing fees” in the Statement of Operations.
Janus Capital furnishes certain administration, compliance, and accounting services for the Portfolio and is reimbursed by the Portfolio for certain of its costs in providing those services (to the extent Janus Capital seeks reimbursement and such costs are not otherwise waived). In addition, employees of Janus Capital and/or its affiliates may serve as officers of the Trust. The Portfolio also pays for some or all of the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. The Portfolio pays these costs based on out-of-pocket expenses incurred by Janus Capital, and these costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital provides to the Portfolio. These amounts are disclosed as “Portfolio administration fees” on the Statement of Operations. Some expenses related to compensation payable to the Portfolio's Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $56,245 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2016. The Portfolio's portion is reported as part of “Other expenses” on the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is included as of December 31, 2016 on the Statement of Assets and Liabilities in the asset, “Non-interested Trustees’ deferred compensation,” and liability, “Non-interested Trustees’ deferred compensation fees.” Additionally, the recorded unrealized appreciation/(depreciation) is included in “Unrealized net appreciation/(depreciation) of investments, foreign currency
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Notes to Financial Statements
translations and non-interested Trustees’ deferred compensation” on the Statement of Assets and Liabilities. Deferred compensation expenses for the year ended December 31, 2016 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $201,900 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2016.
Pursuant to the provisions of the 1940 Act and related rules, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Funds”). As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated money market funds or cash management pooled investment vehicles and the Investing Funds. Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered product compliant with Rule 2a-7 under the 1940 Act. There are no restrictions on the Portfolio's ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. The units of Janus Cash Liquidity Fund LLC are not charged any management fee, sales charge or service fee.
Any purchases and sales, realized gains/losses and recorded dividends from affiliated investments during the year ended December 31, 2016 can be found in a table located in the Notes to Schedule of Investments and Other Information.
The Portfolio is permitted to purchase or sell securities (“cross-trade”) between itself and other funds or accounts managed by Janus Capital Management LLC in accordance with Rule 17a-7 under the Investment Company Act of 1940 (“Rule 17a-7”), when the transaction is consistent with the investment objectives and policies of the Portfolio and in accordance with the Internal Cross Trade Procedures adopted by the Trust’s Board of Trustees. These procedures have been designed to ensure that any cross-trade of securities by the Portfolio from or to another fund or account that is or could be considered an affiliate of the Portfolio under certain limited circumstances by virtue of having a common investment adviser, common Officer, or common Trustee complies with Rule 17a-7. Under these procedures, each cross-trade is effected at the current market price to save costs where allowed. During the year ended December 31, 2016, the Portfolio engaged in cross trades amounting to $2,053,809 in purchases and $1,835,025 in sales, resulting in a net realized loss of $15,382. The net realized loss is included within the “Net Realized Gain/(Loss) on Investments” section of the Portfolio’s Statement of Operations.
4. Federal Income Tax
The tax components of capital shown in the table below represent: (1) distribution requirements the Portfolio must satisfy under the income tax regulations; (2) losses or deductions the Portfolio may be able to offset against income and gains realized in future years; and (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
Other book to tax differences primarily consist of deferred compensation and foreign currency contract adjustments. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses, if applicable. Other foreign currency gains and losses on debt instruments are treated as ordinary income for federal income tax purposes pursuant to Section 988 of the Internal Revenue Code.
Loss Deferrals | Other Book | Net Tax | |||||
Undistributed | Undistributed | Accumulated | Late-Year | Post-October | to Tax | Appreciation/ | |
$ - | $ 40,664,375 | $ - | $ - | $ - | $ (16,204) | $143,069,062 |
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Notes to Financial Statements
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of December 31, 2016 are noted below.
Unrealized appreciation and unrealized depreciation in the table below exclude appreciation/depreciation on foreign currency translations. The primary differences between book and tax appreciation or depreciation of investments are wash sale loss deferrals and investments in partnerships.
Federal Tax Cost | Unrealized | Unrealized | Net Tax Appreciation/ |
$ 552,189,198 | $150,594,657 | $ (7,525,595) | $ 143,069,062 |
Income and capital gains distributions are determined in accordance with income tax regulations that may differ from accounting principles generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferral of wash sale losses, foreign currency transactions, net investment losses, and capital loss carryovers. Certain permanent differences such as tax returns of capital and net investment losses noted below have been reclassified to capital.
For the year ended December 31, 2016 | ||||
Distributions | ||||
From Ordinary Income | From Long-Term Capital Gains | Tax Return of Capital | Net Investment Loss | |
$ 6,435,775 | $ 95,750,666 | $ - | $ (166,998) |
For the year ended December 31, 2015 | ||||
Distributions | ||||
From Ordinary Income | From Long-Term Capital Gains | Tax Return of Capital | Net Investment Loss | |
$ 9,606,802 | $ 150,393,129 | $ - | $ - |
Permanent book to tax basis differences may result in reclassifications between the components of net assets. These differences have no impact on the results of operations or net assets. The following reclassifications have been made to the Portfolio:
Increase/(Decrease) to Capital | Increase/(Decrease) to Undistributed | Increase/(Decrease) to Undistributed | |
$ (166,996) | $ 157,450 | $ 9,546 |
5. Capital Share Transactions
Year ended December 31, 2016 | Year ended December 31, 2015 | |||||
Shares | Amount | Shares | Amount | |||
Institutional Shares: | ||||||
Shares sold | 699,774 | $ 23,356,199 | 1,146,883 | $ 44,193,370 | ||
Reinvested dividends and distributions | 1,192,492 | 37,062,653 | 1,601,927 | 57,445,111 | ||
Shares repurchased | (2,038,134) | (67,589,332) | (2,057,242) | (82,810,292) | ||
Net Increase/(Decrease) | (145,868) | $ (7,170,480) |
| 691,568 | $ 18,828,189 | |
Service Shares: | ||||||
Shares sold | 1,166,469 | $ 37,891,921 | 1,444,396 | $ 53,479,766 | ||
Reinvested dividends and distributions | 2,187,564 | 65,123,788 | 2,961,444 | 102,554,820 | ||
Shares repurchased | (3,651,743) | (116,426,427) | (2,680,089) | (101,224,018) | ||
Net Increase/(Decrease) | (297,710) | $(13,410,718) |
| 1,725,751 | $ 54,810,568 |
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Notes to Financial Statements
6. Purchases and Sales of Investment Securities
For the year ended December 31, 2016, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of | Proceeds from Sales | Purchases of Long- | Proceeds from Sales |
$384,179,640 | $ 483,927,714 | $ - | $ - |
7. Merger Related Matters
On October 3, 2016, Janus Capital Group Inc. (“JCGI”), the direct parent of Janus Capital Management LLC, the investment adviser to the Portfolio (“Janus Capital”), and Henderson Group plc (“Henderson”) announced that they had entered into an Agreement and Plan of Merger (“Merger Agreement”) relating to the strategic combination of Henderson and JCGI (the “Transaction”). Pursuant to the Merger Agreement, a newly formed, direct wholly-owned subsidiary of Henderson will merge with and into JCGI, with JCGI as the surviving corporation and a direct wholly-owned subsidiary of Henderson. The Transaction is currently expected to close in the second quarter of 2017, subject to requisite shareholder and regulatory approvals.
The consummation of the Transaction may be deemed to be an “assignment” (as defined in the Investment Company Act of 1940, as amended) of the current advisory agreement between Janus Capital and the Portfolio. In addition, the consummation of the Transaction may be deemed to be an assignment of the current sub-advisory agreements between Janus Capital and each of INTECH Investment Management LLC (“INTECH”) and Perkins Investment Management LLC (“Perkins”), the subadvisers to certain portfolios. As a result, the consummation of the Transaction may cause such investment advisory agreements and investment sub-advisory agreements to terminate automatically in accordance with their respective terms.
On December 8, 2016, the Board of Trustees of the Portfolio (the “Board of Trustees”) approved, subject to approval of shareholders, a new investment advisory agreement between the Portfolio and Janus Capital in order to permit Janus Capital to continue to provide advisory services to the Portfolio following the closing of the Transaction. The new investment advisory agreement will have substantially similar terms as the corresponding current investment advisory agreement.
On December 8, 2016, the Board of Trustees also approved interim investment advisory agreements between the Portfolio and Janus Capital and interim sub-advisory agreements between Janus Capital and the Portfolio’s subadviser, as applicable. In the event shareholders of the Portfolio do not approve the new investment advisory agreement (and, if applicable, the new investment sub-advisory agreement) prior to the closing of the Transaction, an interim investment advisory agreement (and, if applicable, an interim investment sub-advisory agreement) will take effect with respect to the Portfolio upon the closing of the Transaction. Such interim agreements will continue in effect for a term ending on the earlier of 150 days from the closing of the Transaction, or when shareholders of the Portfolio approve the new investment advisory agreement and new investment sub-advisory agreement, if applicable. Compensation earned by Janus Capital and the Portfolio’s subadviser, if applicable, under their respective interim investment advisory agreement or interim investment sub-advisory agreement will be held in an interest-bearing escrow account and will be paid to Janus Capital or the subadviser, as applicable, if shareholders approve the corresponding new investment advisory agreement or new investment sub-advisory agreement prior to the end of the interim period. Except for the term and escrow provisions described above, the terms of each interim investment advisory agreement and interim investment subadvisory agreement are substantially similar to those of the corresponding current investment advisory agreement or current investment sub-advisory agreement.
In addition, the Portfolio’s name will change to reflect “Janus Henderson” as part of the Portfolio’s name.
Shareholders and contract owners of record of the Portfolio as of December 29, 2016, will receive a proxy statement, notice of special meeting of shareholders, and proxy card, containing detailed information regarding shareholder proposals with respect to these and certain other matters. The shareholder meeting is expected to be held on or about April 6, 2017.
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Notes to Financial Statements
8. Subsequent Event
Management has evaluated whether any events or transactions occurred subsequent to December 31, 2016 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Janus Aspen Forty Portfolio
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Janus Aspen Series and Shareholders of Janus Aspen Forty Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Janus Aspen Forty Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) as of December 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Portfolio’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of December 31, 2016 by correspondence with the custodian and transfer agent, provide a reasonable basis for our opinion.
Denver, Colorado
February 10, 2017
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Additional Information (unaudited)
Proxy Voting Policies and Voting Record
A description of the policies and procedures that the Portfolio uses to determine how to vote proxies relating to its portfolio securities is available without charge: (i) upon request, by calling 1-800-525-0020 (toll free); (ii) on the Portfolio’s website at janus.com/proxyvoting; and (iii) on the SEC’s website at http://www.sec.gov. Additionally, information regarding the Portfolio’s proxy voting record for the most recent twelve-month period ended June 30 is also available, free of charge, through janus.com/proxyvoting and from the SEC’s website at http://www.sec.gov.
Quarterly Portfolio Holdings
The Portfolio files its complete portfolio holdings (schedule of investments) with the SEC for the first and third quarters of each fiscal year on Form N-Q within 60 days of the end of such fiscal quarter. The Portfolio’s Form N-Q: (i) is available on the SEC’s website at http://www.sec.gov; (ii) may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (information on the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iii) is available without charge, upon request, by calling Janus at 1-800-525-0020 (toll free).
APPROVAL OF ADVISORY AND SUB-ADVISORY AGREEMENTS WITH JANUS CAPITAL AND JANUS CAPITAL AFFILIATES DURING THE PERIOD
On September 15, 2016, Janus Capital Group Inc. (“Janus”) advised the Trustees of Janus Investment Fund (the “Trust”), each of whom serves as an “independent” Trustee (the “Board” or the “Trustees”) of its intent to seek a strategic combination of its advisory business with Henderson Group plc (“Henderson”). The Board met with the Chief Executive Officer of Janus, who outlined the proposed combination and the potential benefits to Janus Capital Management LLC (“Janus Capital”) and each Fund of the Trust (each, a “Fund” and collectively, the “Funds”). Subsequent to the September 15, 2016 meeting, the Trustees identified a list of basic principles, which they believed should serve as the foundation for their review of the organizational, operational and strategic issues involved with any potential change in control of Janus Capital, the investment adviser to the Funds. These basic principles were communicated to Janus Capital on September 27, 2016, and were intended to be shared with Henderson. On October 3, 2016, Janus announced that it had entered into a definitive Agreement and Plan of Merger with Henderson pursuant to which Janus and Henderson agreed to effect an all-stock merger of equals strategic combination of their respective businesses, with Janus Capital surviving the merger as a direct wholly-owned subsidiary of Henderson (the “Transaction”). The Board was advised that, subject to certain conditions, the Transaction is currently expected to close during the second quarter of 2017.
As part of its due diligence, the Board developed an initial list of questions related to the proposed transaction, which was provided to Janus Capital on October 6, 2016. At a special Board meeting held on October 19, 2016, the Board considered Janus Capital’s response to the initial information request and met with the management of Janus to discuss the impact of the Transaction on the nature, extent and quality of services Janus Capital is expected to provide to the Janus Funds following the Transaction, addressing, among other matters, the personnel expected to provide such services, and the resources available to do so. After its October 19, 2016 meeting, the Board developed a supplemental request for additional information, which was provided to Janus Capital on October 26, 2016. At another special Board meeting held on November 7-8, 2016, the Board considered Janus Capital’s response to the supplemental information request and again met with the management of Janus and Henderson to discuss the impact of the Transaction on the nature, extent and quality of services Janus Capital is expected to provide to the Janus Funds following the Transaction, and also met with various officers of the Funds and of Janus Capital including various Fund portfolio managers. After its November 7-8, 2016 meeting, the Board developed a second supplemental request for additional information, which was provided to Janus Capital on November 21, 2016. On December 7-8, 2016, the Board met to consider Janus Capital’s response to the second supplemental information request and to also consider the proposed new investment advisory agreements between the Trust, on behalf of each Fund, and Janus Capital (each, a “New Advisory Agreement” and collectively, the “New Advisory Agreements”) and the new sub-advisory agreements between Janus Capital and each of the Funds that utilize INTECH Investment Management LLC (“INTECH”) or Perkins Investment Management LLC (“Perkins”) as sub-advisers (each, a “New Sub-Advisory Agreement” and collectively, the “New Sub-Advisory Agreements”) to take effect immediately after the Transaction or shareholder approval, whichever is later. During each of these meetings, the Board sought additional and clarifying information as it deemed necessary or appropriate. Throughout the process, the Board had the assistance of its independent legal counsel, who advised them on, among other things, its duties and obligations.
In connection with the Board’s review, Janus Capital provided, and the Board obtained, substantial information regarding the following matters: the management, financial position and business of Henderson; the history of Henderson’s
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Additional Information (unaudited)
business and operations; the investment performance of the investment companies advised by Henderson; the proposed structure, operations and investment processes of the combined investment management organization after the Transaction and the strategy for operating and growing the business following the Transaction; the future plans of Janus and Henderson with respect to the Funds and any proposed changes to the operations or structure of the Funds; and the future plans of Janus and Henderson with respect to the provision of services to the Funds, and the entities providing such services, including those affiliated with Janus. The Board also received information regarding the terms of the Transaction, anticipated management of the combined organization, the resources that each of Janus and Henderson bring to the combined organization and the process being followed by Janus and Henderson to integrate their organizations. The Board also received information regarding the impact of the Transaction on each of INTECH and Perkins.
In connection with the Board’s approval of New Advisory Agreements and New Sub-Advisory Agreements at its December 8, 2016 meeting, the Board also continued its on-going annual process to determine whether to continue the existing investment advisory agreements between Janus Capital and the Trust on behalf of each Fund (each, a “Current Advisory Agreement” and collectively, the “Current Advisory Agreements”) and the existing sub-advisory agreements between Janus Capital and each of the Funds that utilize INTECH or Perkins as sub-advisers (each, a “Current Sub-Advisory Agreement” and collectively, the “Current Sub-Advisory Agreements”). In this regard, the Board received and reviewed information provided by Janus and the respective Sub-Advisers in response to requests of the Board and its independent legal counsel. The Board also received and reviewed information and analysis provided by, and in response to requests of, its independent fee consultant. The Board noted that as part of this annual process, the Board had considered and was in the process of considering, numerous factors, including the nature and quality of services provided by Janus Capital and each Sub-Adviser, as applicable; investment performance, on an absolute basis and relative to appropriate peer groups and one or a combination of market indices; investment management fees, expense ratios and asset sizes of the Funds and peer groups; investment management fees charged to comparable investment companies, separate accounts and non-fund clients; Janus Capital’s profitability from managing the Funds; fall-out benefits to Janus Capital from its relationship to the Funds, including revenues derived from services provided to the Funds by affiliates of Janus Capital; and the potential benefits to Janus Capital, the Funds of receiving research services from broker/dealer firms in connection with the allocation of portfolio transactions to such firms.
In determining whether to approve the New Advisory Agreement for each Fund and the New Sub-Advisory Agreement for Funds managed by INTECH or Perkins in connection with the Transaction, and whether to recommend approval to Fund shareholders, the Board received information and made inquiries into all matters as it deemed appropriate. The Board reviewed and analyzed various factors it deemed relevant, including the following factors, among others, none of which by itself was considered dispositive:
· The terms of the New Advisory Agreements are substantially similar to the corresponding Current Advisory Agreements, and the contractual fee rate will not change. In this regard, see the discussion of the Board’s considerations with respect to its most recent approval of the Current Advisory Agreements prior to December 8, 2016, as disclosed in each Fund’s most recent prior annual or semi-annual shareholder report, as applicable.
· The terms of the New Sub-Advisory Agreements are substantially similar to the corresponding Current Sub-Advisory Agreements, and the contractual fee rate will not change. In this regard, see the discussion of the Board’s considerations with respect to its most recent approval of the Current Sub-Advisory Agreements prior to December 8, 2016, as disclosed in each Fund’s most recent prior annual or semi-annual shareholder report, as applicable.
· Janus Capital’s plans for the operation of the Funds, including its plans for the continued provision of all services currently provided to the Funds by Janus Capital and its affiliates, including, among others, investment advisory services, portfolio trading services, and Fund administrative and accounting services, and the personnel and resources proposed to support the provision of such services.
· The estimated profitability to Janus Capital from managing the Funds after the Transaction, including potential economies of scale and fall-out benefits to Janus Capital from its relationship to the Funds, including revenues derived from services provided to the Funds by affiliates of Janus Capital, and the potential benefits to Janus Capital, and the Funds of receiving research services from broker/dealer firms in connection with the allocation of portfolio transactions to such firms.
In connection with its deliberations, the Board received assurances from Janus, on behalf of itself and its affiliates (collectively, “Janus”) including the following:
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Additional Information (unaudited)
· Janus has provided to the Board such information as it believes is reasonably necessary to evaluate the New Advisory Agreements and New Sub-Advisory Agreements.
· Janus is committed to the continuance, without interruption, of services to the Funds of at least the type and quality currently provided by Janus Capital and its affiliates, or superior thereto.
· The Transaction is not expected to affect negatively the nature, extent or quality of the investment advisory services provided by Janus Capital to the Funds following the Transaction, and the investment advisory services are expected to be at least comparable to the services being provided under the Current Advisory Agreements and Current Sub-Advisory Agreements. In this regard, the Board noted specific representations that Janus does not intend for the nature, extent or quality of investment advisory and other services to be provided to the Funds following the Transaction to change, and the extent of such services were expected to increase based on the combined resources of the combined investment management organization after the Transaction, and should the nature, extent or quality of such services decline, Janus would commit the resources needed to return such services to pre-Transaction levels.
· The Funds’ current operations were expected to remain largely unchanged, except for certain fund reorganizations which will be separately considered by the Board, and such other changes as were or will be presented to the Board.
· The Transaction is not expected to result in any changes to the portfolio managers providing services to the Funds.
· After the Transaction, the distribution and marketing services provided to the Janus Funds were expected to be improved or enhanced based on the combined resources of Janus and Henderson. In this regard, Janus Capital advised the Board that after the Transaction, the extent of distribution and marketing services provided to the Janus Funds are expected to increase based on the combined resources of Janus and Henderson. This is due primarily to the anticipated increase of sales related resources and expanded global presence of the combined Janus Henderson organization, which is expected to enhance visibility and brand recognition of the Janus Henderson Funds.
· The intent of Janus Capital to take the necessary and appropriate steps to retain and attract key investment advisory personnel.
· The intent of Janus to take the necessary and appropriate steps to retain and attract key compliance, financial, fund accounting and administrative personnel supporting the management and oversight of the Funds.
· Janus is not aware of any express or implied term, condition, arrangement or understanding that would impose in its best judgement an “unfair burden” on any Fund as a result of the Transaction, as defined in Section 15(f) of the 1940 Act, and that Janus will take no action that would have the effect of imposing such an “unfair burden” on any Fund in connection with the Transaction.
Janus assured the Board that it intended to comply with Section 15(f) of the Investment Company Act of 1940, as amended. Section 15(f) provides a non-exclusive safe harbor for an investment adviser to an investment company or any of its affiliated persons to receive any amount or benefit in connection with a change in control of the investment adviser so long as two conditions are met. First, for a period of three years after the transaction, at least 75% of the board members of the investment company must not be interested persons of such investment adviser (as defined under the 1940 Act). The composition of the Board is in compliance with this provision of Section 15(f). In addition, after careful review and consideration, the Board determined that it would be in the best interests of the Funds to add to the Board an individual who currently acts as a non-interested board member of the Henderson Trust. The Board believes that this change in the Board composition will provide perspective and insight relating to experience working with the Henderson organization. The Board’s Nominating and Governance Committee considered a number of candidates and recommended that the Board nominate one proposed new trustee from those candidates who currently act as non-interested board members of the Henderson Trust. The Board approved that trustee nominee to serve on the Board, subject to election by the shareholders of the Funds and contingent on the closing of the Transaction. If the new trustee is elected and serves on the Board, the Board composition would continue to satisfy the provisions of Section 15(f).
To meet the second condition of Section 15(f), an “unfair burden” must not be imposed upon the investment company as a result of such transaction or any express or implied terms, conditions or understandings applicable thereto. The
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Additional Information (unaudited)
term “unfair burden” is defined in Section 15(f) to include any arrangement during the two-year period after the transaction, whereby the investment adviser, or any interested person of such adviser, receives or is entitled to receive any compensation, directly or indirectly, from the investment company or its shareholders (other than fees for bona fide investment advisory or other services) or from any person in connection with the purchase or sale of securities or other property to, from or on behalf of the investment company (other than bona fide ordinary compensation as principal underwriter for such investment company).
Janus represented that it does not believe that an “unfair burden” will be placed on the Funds as a result of the Transaction. In furtherance thereof, Janus has undertaken to pay the costs of preparing and distributing proxy materials to, and of holding the meetings of, the Funds’ shareholders (the “Meetings”), as well as other fees and expenses in connection with the Transaction, including the reasonable fees and expenses of legal counsel and consultants to the Funds and the Trustees. In addition, Janus has agreed, for a period of two years following the closing of the Transaction, (i) not to request any increases to advisory fees for the Funds, other than those proposed to and approved by the Board prior to the close of the Transaction, and (ii) to continue to use the current process by which expense caps are set annually for the Funds.
As a result of its review and consideration of the New Investment Advisory Agreements and New Sub-Advisory Agreements in connection with the Transaction, at a meeting on December 8, 2016, the Board voted unanimously to approve a New Investment Advisory Agreement for each Fund and a New Sub-Advisory Agreement for each Fund managed by INTECH or Perkins, and to recommend such agreements to the Funds’ shareholders for their approval.
Approval of Interim Advisory and Sub-Advisory Agreements with Janus Capital and Janus Capital Affiliates during the Period
In the event shareholders of a Fund do not approve such Fund’s New Advisory Agreement and/or New Sub-Advisory Agreement at the Meetings prior to the closing of the Transaction, Janus Capital proposed that an interim investment advisory agreement between Janus Capital and such Fund (each, an “Interim Advisory Agreement” and collectively, the “Interim Advisory Agreements”) and an interim sub-advisory agreement between Janus Capital and the applicable Sub-Adviser (each, an “Interim Sub-Advisory Agreement” and collectively, the “Interim Sub-Advisory Agreements”) take effect upon the closing of the Transaction. At the December 8, 2016 meeting, the Board, all of whom are Independent Trustees, unanimously approved an Interim Advisory Agreement for each Fund and an Interim Sub-Advisory Agreement for each applicable Fund in order to assure continuity of investment advisory services to the Funds and sub-advisory services to the sub-advised Funds after the Transaction. The terms of each Interim Advisory Agreement are substantially identical to those of the applicable Current Advisory Agreement and New Advisory Agreement, except for the term and escrow provisions described below. Similarly, the terms of each Interim Sub-Advisory Agreement are substantially identical to those of the Current Sub-Advisory Agreements and New Sub-Advisory Agreements, except for the term and escrow provisions described below. The Interim Advisory Agreement and Interim Sub-Advisory Agreement will continue in effect for a term ending on the earlier of 150 days from the closing of the Transaction (the “150-day period”) or when shareholders of the Fund approve the New Advisory Agreement and/or New Sub-Advisory Agreement. Pursuant to Rule 15a-4 under the 1940 Act, compensation earned by Janus Capital under an Interim Advisory Agreement and compensation earned by a Sub-Adviser under an Interim Sub-Advisory Agreement will be held in an interest-bearing escrow account. If shareholders of a Fund approve the New Advisory Agreement prior to the end of the 150-day period, the amount held in the escrow account under the Interim Advisory Agreement will be paid to Janus Capital. If shareholders of a Fund approve the New Advisory Agreement and New Sub-Advisory Agreement prior to the end of the 150-day period, the amount held in the escrow account under the Interim Sub-Advisory Agreement will be paid to the Sub-Adviser. If shareholders of a Fund do not approve the New Advisory Agreement prior to the end of the 150-day period, the Board will take such action as it deems to be in the best interests of the Fund, and Janus Capital will be paid the lesser of its costs incurred in performing its services under the Interim Advisory Agreement or the total amount in the escrow account, plus interest earned. If shareholders of a Fund do not approve the New Advisory Agreement and/or New Sub-Advisory Agreement prior to the end of the 150-day period, the Board will take such action as it deems to be in the best interests of the Fund, and the Sub-Adviser will be paid the lesser of its costs incurred in performing its services under the Interim Sub-Advisory Agreement or the total amount in the escrow account, plus interest earned.
Approval of an Amended and Restated Investment Advisory Agreement for Janus Portfolio
Janus Capital met with the Trustees on December 7-8, 2016, to discuss the approval of an amended and restated investment advisory agreement (the “Amended Advisory Agreement”) between Janus Capital and the Trust on behalf of
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Additional Information (unaudited)
Janus Portfolio (for the purposes of this section, the “Fund” refers to Janus Portfolio) and other matters related to the proposed changes to the Fund’s name, principal investment strategies, and portfolio management team (the “Realignment”). At the meeting, the Trustees also discussed the Amended Advisory Agreement and other matters related to the Realignment with their independent counsel in executive session. During the course of this meeting, the Trustees requested and considered such information as they deemed relevant to their deliberations. In addition, at prior meetings and during the course of this meeting the Board also considered the proposal to merge the Janus Fund, a series of Janus Investment Fund, into the Janus Research Fund, another series of Janus Investment Fund, and undertook a comprehensive process to evaluate the impact of the Transaction on the nature, quality and extent of services expected to be provided by Janus Capital to the Fund, including after the completion of the Transaction. For a fuller discussion of the Board’s consideration of the approval of a new investment advisory agreement for the Fund in connection with the Transaction, see “Approval of Advisory and Sub-Advisory Agreements with Janus and Janus Affiliates during the Period” above.
At a meeting of the Board of Trustees held on December 8, 2016, the Trustees approved the Amended Advisory Agreement and other matters related to the Realignment. In determining whether to approve the Amended Advisory Agreement, and whether to recommend approval to Fund shareholders, the Board received information and made inquiries into all matters as it deemed appropriate. The Board reviewed and analyzed various factors it deemed relevant, including the following factors, among others, none of which by itself was considered dispositive:
· the terms of the Amended Advisory Agreement are substantially the same as the Current Advisory Agreement, except for the change to the advisory fee rate based on the amount of such outperformance or underperformance (the “Full Performance Rate”) and cumulative investment record of the Fund’s benchmark index (the “Performance Fee Benchmark”);
· the estimated impact of the change to the Full Performance Rate and Performance Fee Benchmark on the amount of advisory fees to be paid by the Fund, including consideration of comparative pro forma data showing the advisory fees payable if the Amended Advisory Agreement had been in place in prior years;
· the Fund’s investment team will be able to more efficiently manage the Fund’s portfolio, assuming the merger of the Janus Fund into Janus Research Fund is implemented, which may also provide benefits from opportunities to aggregate trading across funds that have similar investment strategies;
· Janus Capital’s belief that the Fund shareholders may benefit from the Realignment, as a result of the research-driven investment process to be implemented, which includes lower historical transaction costs and potential performance gains from securities lending as compared to the Fund’s current investment approach;
· the Realignment was being proposed as part of Janus Capital’s efforts to streamline its product line;
· Janus Capital’s belief that the Fund would benefit from Janus Capital’s operational efficiencies resulting from the merger of the Janus Fund into the Janus Research Fund and the Realignment, including a potentially more efficient and effective investment management approach providing the potential for a growing fund and improved performance after the Realignment;
· the costs of seeking approval of the Amended Advisory Agreement will be borne by Janus Capital;
· the costs incurred to reposition the Fund’s portfolio in connection with the Realignment;
· the potential tax consequences of any repositioning of the Fund’s portfolio as a result of the Merger; and any potential benefits of Janus Capital and its affiliates as a result of the Realignment.
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Useful Information About Your Portfolio Report (unaudited)
The Management Commentary in this report includes valuable insight as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. A company may be allocated to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed in the Management Commentary are just that: opinions. They are a reflection based on best judgment at the time this report was compiled, which was December 31, 2016. As the investing environment changes, so could opinions. These views are unique and are not necessarily shared by fellow employees or by Janus in general.
Performance Overviews
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. When comparing the performance of the Portfolio with an index, keep in mind that market indices are not available for investment and do not reflect deduction of expenses.
Average annual total returns are quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
Schedule of Investments
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options, swaptions, and swaps follow the Portfolio’s Schedule of Investments (if applicable).
Statement of Assets and Liabilities
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
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Useful Information About Your Portfolio Report (unaudited)
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned, and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid, and expenses owed but not yet paid. Additionally, there may be other assets and liabilities such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
Statement of Operations
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
Statements of Changes in Net Assets
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors, and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
Financial Highlights
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios, and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the
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Useful Information About Your Portfolio Report (unaudited)
period. The next line reflects the total return for the period. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Do not confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the Portfolio’s yield because it does not take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager(s) and/or investment personnel. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Shareholder Meeting (unaudited)
A Special Meeting of Shareholders of the Portfolio was held on June 14, 2016. At the meeting, the following matter was voted on and approved by the Shareholders. Each whole or fractional vote reported represents one whole or fractional dollar of net asset value held on the record date for the meeting. The results of the Special Meeting of Shareholders are noted below.
Proposal
To elect eight Trustees, each of whom is considered “independent.”
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2016:
| |
Capital Gain Distributions | $95,750,666 |
Dividends Received Deduction Percentage | 80% |
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Janus Aspen Forty Portfolio
Trustees and Officers (unaudited)
The Portfolio’s Statement of Additional Information includes additional information about the Trustees and officers and is available, without charge, by calling 1-877-335-2687.
The following are the Trustees and officers of the Trust, together with a brief description of their principal occupations during the last five years (principal occupations for certain Trustees may include periods over five years).
Each Trustee has served in that capacity since he or she was originally elected or appointed. The Trustees do not serve a specified term of office. Each Trustee will hold office until the termination of the Trust or his or her earlier death, resignation, retirement, incapacity, or removal. Under the Portfolio’s Governance Procedures and Guidelines, the policy is for Trustees to retire no later than the end of the calendar year in which the Trustee turns 75. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. The Portfolio’s Nominating and Governance Committee will consider nominees for the position of Trustee recommended by shareholders. Shareholders may submit the name of a candidate for consideration by the Committee by submitting their recommendations to the Trust’s Secretary. Each Trustee is currently a Trustee of one other registered investment company advised by Janus Capital: Janus Investment Fund. Collectively, these two registered investment companies consist of 58 series or funds.
The Trust’s officers are elected annually by the Trustees for a one-year term. Certain officers also serve as officers of Janus Investment Fund. Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. Except as otherwise disclosed, Portfolio officers receive no compensation from the Portfolio, except for the Portfolio’s Chief Compliance Officer, as authorized by the Trustees.
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
William F. McCalpin | Chairman Trustee | 1/08-Present 6/02-Present | Managing Partner, Impact Investments, Athena Capital Advisors LLC (independent registered investment advisor) (since 2016) and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Chief Executive Officer, Imprint Capital (impact investment firm) (2013-2015) and Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 58 | Director of Mutual Fund Directors Forum (a non-profit organization serving independent directors of U.S. mutual funds), Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Alan A. Brown | Trustee | 1/13-Present | Executive Vice President, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 58 | Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of MotiveQuest LLC (strategic social market research company) (2003-2016); Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
William D. Cvengros | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 58 | Advisory Board Member, Innovate Partners Emerging |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Raudline Etienne | Trustee | 6/16-Present | Senior Advisor, Albright Stonebridge Group LLC (global strategy firm) (since 2016). Formerly, Senior Vice President (2011-2015), Albright Stonebridge Group LLC; and Deputy Comptroller and Chief Investment Officer, New York State Common Retirement Fund (public pension fund) (2008-2011). | 58 | Director of Brightwood Capital Advisors, LLC (since 2014). | |
Gary A. Poliner | Trustee | 6/16-Present | Retired. Formerly, President (2010-2013) and Executive Vice President and Chief Risk Officer (2009-2012) of Northwestern Mutual Life Insurance Company. | 58 | Director of MGIC Investment Corporation (private mortgage insurance) (since 2013) and West Bend Mutual Insurance Company (property/casualty insurance) (since 2013). Formerly, Trustee of Northwestern Mutual Life Insurance Company (2010-2013); Chairman and Director of Northwestern Mutual Series Fund, Inc. (2010-2012); and Director of Frank Russell Company (global asset management firm) (2008-2013). |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
James T. Rothe | Trustee | 1/97-Present | Co-founder and Managing Director of Roaring Fork Capital SBIC, L.P. (SBA SBIC fund focusing on private investment in public equity firms), and Professor Emeritus of Business of the University of Colorado, Colorado Springs, CO (since 2004). Formerly, Professor of Business of the University of Colorado (2002-2004), and Distinguished Visiting Professor of Business (2001-2002) of Thunderbird (American Graduate School of International Management), Glendale, AZ. | 58 | Formerly, Director of Red Robin Gourmet Burgers, Inc. (RRGB) (2004-2014). | |
William D. Stewart | Trustee | 6/84-Present | Retired. Formerly, President and founder of HPS Products and Corporate Vice President of MKS Instruments, Boulder, CO (a provider of advanced process control systems for the semiconductor industry) (1976-2012). | 58 | None |
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Trustees and Officers (unaudited)
TRUSTEES | ||||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Principal Occupations During the Past Five Years | Number of Portfolios/Funds in Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years | |
Independent Trustees | ||||||
Linda S. Wolf | Trustee | 11/05-Present | Retired. Formerly, Chairman and Chief Executive Officer of Leo Burnett (Worldwide) (advertising agency) (2001-2005). | 58 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014) and The Field Museum of Natural History (Chicago, IL) (until 2014). |
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Trustees and Officers (unaudited)
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period. |
OFFICERS | |||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Principal Occupations During the Past Five Years |
A. Douglas Rao | Executive Vice President and Co-Portfolio Manager | 6/13-Present | Portfolio Manager for other Janus accounts. Formerly, Partner and Portfolio Manager for Chautauqua Capital Management (2012-2013) and Portfolio Manager for Marsico Capital Management, LLC (2007-2012). |
Nick Schommer | Executive Vice President and Co-Portfolio Manager | 1/16-Present | Portfolio Manager for other Janus accounts and Analyst for Janus Capital. |
Bruce L. Koepfgen | President and Chief Executive Officer | 7/14-Present | President of Janus Capital Group Inc. and Janus Capital Management LLC (since 2013); Executive Vice President and Director of Janus International Holding LLC (since 2011); Executive Vice President of Janus Distributors LLC (since 2011); Executive Vice President and Working Director of INTECH Investment Management LLC (since 2011); Executive Vice President and Director of Perkins Investment Management LLC (since 2011); and Executive Vice President and Director of Janus Management Holdings Corporation (since 2011). Formerly, Executive Vice President of Janus Services LLC (2011-2015), Janus Capital Group Inc. and Janus Capital Management LLC (2011-2013); and Chief Financial Officer of Janus Capital Group Inc., Janus Capital Management LLC, Janus Distributors LLC, Janus Management Holdings Corporation, and Janus Services LLC (2011-2013). |
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Trustees and Officers (unaudited)
OFFICERS | |||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Principal Occupations During the Past Five Years |
David R. Kowalski | Vice President, Chief Compliance Officer, and Anti-Money Laundering Officer | 6/02-Present | Senior Vice President and Chief Compliance Officer of Janus Capital, Janus Distributors LLC, and Janus Services LLC; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. |
Jesper Nergaard | Chief Financial Officer | 3/05-Present | Vice President of Janus Capital and Janus Services LLC. |
Kathryn L. Santoro 151 Detroit Street | Vice President, Chief Legal Counsel, and Secretary | 12/16-Present | Vice President of Janus Capital and Janus Services LLC (since 2016). Formerly, Vice President and Associate Counsel of Curian Capital, LLC and Curian Clearing LLC (2013-2016); and General Counsel and Secretary (2011-2012) and Vice President (2009-2012) of Old Mutual Capital, Inc. |
* Officers are elected at least annually by the Trustees for a one-year term and may also be elected from time to time by the Trustees for an interim period. |
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Notes
NotesPage1
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH® (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins® (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money. | ||||||||||||
Janus, INTECH and Perkins are registered trademarks of Janus International Holding LLC. © Janus International Holding LLC. Funds distributed by Janus Distributors LLC | ||||||||||||
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | |||||||||
C-0217-7532 | 109-02-81115 02-17 |
ANNUAL REPORT December 31, 2016 | |||
Janus Aspen Global Allocation Portfolio - Moderate | |||
Janus Aspen Series | |||
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HIGHLIGHTS · Portfolio management perspective · Investment strategy behind your portfolio · Portfolio performance, characteristics | |||
Table of Contents
Janus Aspen Global Allocation Portfolio - Moderate
Janus Aspen Global Allocation Portfolio - Moderate (unaudited)
PERFORMANCE OVERVIEW
For the 12 months ended December 31, 2016, Janus Aspen Global Allocation Portfolio – Moderate’s Institutional Shares and Service Shares returned 3.10% and 2.95%, respectively. This compares with a return of 7.86% for its primary benchmark, the MSCI All Country World Index, and a 5.69% return for its secondary benchmark, the Global Moderate Allocation Index, an internally calculated, hypothetical combination of total returns from the MSCI All Country World Index (60%) and the Bloomberg Barclays Global Aggregate Bond Index (40%).
INVESTMENT ENVIRONMENT
Global stocks registered steady gains in 2016. The UK’s decision to leave the European Union (EU) in June’s “Brexit” referendum jolted markets, but investors soon regained their composure, sending shares higher. Later, the election of Donald Trump to the U.S. presidency pushed U.S. equity benchmarks to record levels. A recovery in crude oil prices after an early-year plunge propelled energy stocks, resulting in the sector being among the year’s best performers. Other cyclical sectors also registered steady gains as investors expected that a Trump administration would champion pro-growth policies. Given the bias toward improving global growth, historically defensive sectors lagged the broader market. Smaller cap stocks largely exceeded gains registered by large caps.
Early year volatility, capped by June’s Brexit vote, pushed yields on the 10-year U.S. Treasury down to 1.36%. They reversed course, however, as Federal Reserve (Fed) officials hinted at their intent to raise interest rates, a step that occurred in December. The sell-off in Treasurys accelerated after November’s U.S. elections, with the yield on the 10-year note finishing the period at 2.44%. The risk-on environment caused spreads to narrow on both investment-grade and high-yield corporate credit.
INVESTMENT PROCESS
Janus Aspen Global Allocation Portfolio – Moderate invests across a broad set of Janus, INTECH and Perkins funds that span a wide range of global asset categories with a base allocation of 45% to 65% equity investments, 30% to 45% fixed income investments and 5% to 20% alternative investments that are rebalanced quarterly. The Portfolio is structured as a “fund of funds” portfolio that provides investors with broad, diversified exposure to various types of investments with an emphasis on managing investment risk. The Portfolio is also designed to blend the three core competencies that Janus practices as an organization: mathematically driven strategies, risk-managed strategies and fundamentally-driven, growth and value-oriented strategies. We believe that combining these very different approaches in a single investment can potentially produce a portfolio with a unique and powerful performance profile.
The investment process involves setting return expectations for a broad range of Janus mutual funds that we believe best represent the full opportunity set available to today’s investor. We then establish an ideal “model” portfolio based upon the specific risk/return objective of Janus Aspen Global Allocation Portfolio – Moderate. Finally, we select the appropriate Janus, Perkins and INTECH funds that replicate our desired exposure. The allocations assigned to each selected underlying fund are consistent with our view of current market conditions and the long-term trade-off between risk and reward potential that each of these investment types represent. However, as a result of changing market conditions, both the mix of underlying funds and the allocations to these funds will change from time to time.
PERFORMANCE DISCUSSION
The Portfolio underperformed its primary benchmark and also its secondary benchmark during the period. The leading absolute detractors within the Portfolio were Janus International Equity Fund, INTECH International
Janus Aspen Series | 1 |
Janus Aspen Global Allocation Portfolio - Moderate (unaudited)
Managed Volatility Fund and Janus Overseas Fund. Equities in other advanced economies largely underperformed U.S. equities. Furthermore, while both Brazil and Russia delivered strong returns in 2016, two other major emerging markets – China and India – were roughly flat.
The leading contributors to performance were Perkins Large Cap Value Fund, Janus Diversified Alternatives Fund, INTECH U.S. Managed Volatility Fund and Perkins Small Cap Value Fund. Despite a shift toward growth during the latter part of the period, value generated higher returns than growth for year as a whole. The Janus Diversified Alternatives Funds generated solid results, in part, due to the value component of its investment strategy.
OUTLOOK
Looking into 2017, we see a distinct possibility of U.S. economic growth accelerating as the new administration implements business-friendly measures and initiates a wave of fiscal stimulus. We see meaningful upside potential for equities, especially as the distribution of possible outcomes for the asset class shifted considerably after the U.S. election, inferring that economic growth should not only remain positive but also may break out of its subdued post-crisis range.
Our model is telling us that the risk to interest rates and bonds is elevated as inflationary pressures rise. We believe the market is overlooking the possibility of the Fed raising interest rates more rapidly than expected. The market does not fully acknowledge that the Fed is in a precarious position. It needs to replenish its toolkit and we are likely to see the Fed transform from a dove to a hawk in 2017 – we believe this is the hidden risk that will catch most market participants off guard.
We see these inflationary forces building despite a stronger dollar. We expect inflation to be ignited by domestic spending. The consumer, in our view, will start to spend a little more confidently, and that should lead to a pick-up in monetary velocity, thus putting this tremendous supply of money to use. The stronger dollar may also help other economies in their fight against disinflation as the U.S. becomes an exporter of upward price pressure.
Thank you for investing in Janus Aspen Global Allocation Portfolio – Moderate.
2 | DECEMBER 31, 2016 |
Janus Aspen Global Allocation Portfolio - Moderate (unaudited)
Portfolio At A Glance
December 31, 2016
Holdings - (% of Net Assets) | |||
Janus Global Bond Fund - Class N Shares | 24.4 | % | |
Janus International Equity Fund - Class N Shares | 10.6 | ||
Perkins Large Cap Value Fund - Class N Shares | 9.9 | ||
INTECH U.S. Managed Volatility Fund - Class N Shares | 9.0 | ||
Janus Diversified Alternatives Fund - Class N Shares | 8.3 | ||
INTECH International Managed Volatility Fund - Class N Shares | 6.9 | ||
Janus Adaptive Global Allocation Fund - Class N Shares | 5.2 | ||
Janus Short-Term Bond Fund - Class N Shares | 4.3 | ||
Janus Global Real Estate Fund - Class I Shares | 2.9 | ||
Janus Triton Fund - Class N Shares | 2.7 | ||
Janus Overseas Fund - Class N Shares | 2.7 | ||
Perkins Small Cap Value Fund - Class N Shares | 2.7 | ||
Janus Emerging Markets Fund - Class I Shares | 2.2 | ||
Janus Forty Fund - Class N Shares | 1.8 | ||
Janus Fund - Class N Shares | 1.7 | ||
Janus Twenty Fund - Class D Shares | 1.5 | ||
Janus Aspen Global Research Portfolio - Institutional Shares | 1.2 | ||
Janus Contrarian Fund - Class I Shares | 1.1 | ||
Janus Global Select Fund - Class I Shares | 0.9 | ||
Janus Asia Equity Fund - Class I Shares | 0.3 |
Asset Allocation - (% of Net Assets) | ||
Equity Funds | 63.3% | |
Fixed Income Funds | 28.7% | |
Alternative Funds | 8.3% | |
Other | (0.3)% | |
100.0% |
Janus Aspen Series | 3 |
Janus Aspen Global Allocation Portfolio - Moderate (unaudited)
Performance
See important disclosures on the next page. |
| Expense Ratios - | ||||||||
Average Annual Total Return - for the periods ended December 31, 2016 |
|
| per the May 1, 2016 prospectuses | ||||||
|
| One | Five | Since |
|
| Total Annual Fund | Net Annual Fund | |
Institutional Shares |
| 3.10% | 6.72% | 6.21% |
|
| 2.02% | 0.98% | |
Service Shares |
| 2.95% | 6.55% | 6.05% |
|
| 2.26% | 1.24% | |
MSCI All Country World Index |
| 7.86% | 9.36% | 8.14% |
|
|
|
| |
Global Moderate Allocation Index |
| 5.69% | 5.76% | 4.90% |
|
|
|
| |
Morningstar Quartile - Institutional Shares |
| 4th | 2nd | 2nd |
|
|
|
| |
Morningstar Ranking - based on total returns for World Allocation Funds |
| 418/496 | 103/370 | 98/356 |
|
|
|
|
A Portfolio's performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, portfolio holdings and other details.
Performance of the Janus Aspen Global Allocation Portfolio – Moderate depends on that of the underlying funds. They are subject to the volatility of the financial markets. Because Janus Capital is the adviser to the Portfolio and to the underlying affiliated funds held within the Portfolio, it is subject to certain potential conflicts of interest.
Returns shown do not represent actual returns since they do not include insurance charges. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
See Financial Highlights for actual expense ratios during the reporting period.
4 | DECEMBER 31, 2016 |
Janus Aspen Global Allocation Portfolio - Moderate (unaudited)
Performance
Ranking is for the share class shown only; other classes may have different performance characteristics. When an expense waiver is in effect, it may have a material effect on the total return, and therefore the ranking for the period.
© 2016 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
*The Portfolio’s inception date – August 31, 2011
Janus Aspen Series | 5 |
Janus Aspen Global Allocation Portfolio - Moderate (unaudited)
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; 12b-1 distribution and shareholder servicing fees (applicable to Service Shares only); transfer agent fees and expenses payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as any charges at the separate account level or contract level. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Actual | Hypothetical | ||||||||||
| Beginning | Ending | Expenses |
| Beginning | Ending | Expenses | Net Annualized | |||
Institutional Shares | $1,000.00 | $1,008.10 | $1.06 |
| $1,000.00 | $1,024.08 | $1.07 | 0.21% | |||
Service Shares | $1,000.00 | $1,007.40 | $2.27 |
| $1,000.00 | $1,022.87 | $2.29 | 0.45% | |||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. | ||||||||||
†† | Ratios do not include indirect expenses of the underlying funds and/or investment companies in which the Portfolio invests. |
6 | DECEMBER 31, 2016 |
Janus Aspen Global Allocation Portfolio - Moderate
Schedule of Investments
December 31, 2016
| Value | ||||||
Investment Companies£ – 100.3% | |||||||
Alternative Funds – 8.3% | |||||||
Janus Diversified Alternatives Fund - Class N Shares | 61,733 | $622,273 | |||||
Equity Funds – 63.3% | |||||||
INTECH International Managed Volatility Fund - Class N Shares | 70,904 | 516,183 | |||||
INTECH U.S. Managed Volatility Fund - Class N Shares | 69,928 | 673,405 | |||||
Janus Adaptive Global Allocation Fund - Class N Shares | 39,604 | 386,532 | |||||
Janus Asia Equity Fund - Class I Shares | 2,425 | 21,506 | |||||
Janus Aspen Global Research Portfolio - Institutional Shares | 2,282 | 92,716 | |||||
Janus Contrarian Fund - Class I Shares | 4,423 | 85,811 | |||||
Janus Emerging Markets Fund - Class I Shares | 20,660 | 164,867 | |||||
Janus Forty Fund - Class N Shares | 4,616 | 132,705 | |||||
Janus Fund - Class N Shares | 3,853 | 128,542 | |||||
Janus Global Real Estate Fund - Class I Shares | 21,082 | 215,244 | |||||
Janus Global Select Fund - Class I Shares | 5,054 | 65,595 | |||||
Janus International Equity Fund - Class N Shares | 73,511 | 795,390 | |||||
Janus Overseas Fund - Class N Shares | 8,048 | 203,139 | |||||
Janus Triton Fund - Class N Shares | 8,581 | 205,176 | |||||
Janus Twenty Fund - Class D Shares | 1,980 | 110,112 | |||||
Perkins Large Cap Value Fund - Class N Shares | 47,853 | 738,854 | |||||
Perkins Small Cap Value Fund - Class N Shares | 8,933 | 198,142 | |||||
4,733,919 | |||||||
Fixed Income Funds – 28.7% | |||||||
Janus Global Bond Fund - Class N Shares* | 197,842 | 1,824,353 | |||||
Janus Short-Term Bond Fund - Class N Shares | 108,287 | 327,027 | |||||
2,151,380 | |||||||
Total Investments (total cost $7,684,204) – 100.3% | 7,507,572 | ||||||
Liabilities, net of Cash, Receivables and Other Assets – (0.3)% | (24,071) | ||||||
Net Assets – 100% | $7,483,501 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements. | |
Janus Aspen Series | 7 |
Janus Aspen Global Allocation Portfolio - Moderate
Notes to Schedule of Investments and Other Information
Bloomberg Barclays Global Aggregate Bond Index | A broad-based measure of the global investment grade fixed-rate debt markets. |
Global Moderate Allocation Index | An internally calculated, hypothetical combination of total returns from the MSCI All Country World Index |